Squeeze Suppliers for Juicy Savings?

6 comments November 13th, 2006 Sean Delaney - Iasta UK

Whilst researching some articles for a blog I came across this piece again. When I initially read it I thought I’d seen it before somewhere….and yes I did about 15 years ago!

This article is based on a survey of 325 purchasing heads across Europe and the US. It peddles out the usual statistics, which are valid and worthy of note:

• 59% of purchases are still “off contract”
• Services are most ripe for cost reduction
• More Innovation is required within the purchasing department i.e. more use of technology

What I am more surprised about is that this survey made the national papers with headings like “squeeze suppliers for juicy savings”. The underlying theme of the article is that organisations need cut suppliers and renegotiate contracts.

This is all simple stuff however the article offers nothing in the form of what innovation is required (Spend analysis, eSourcing and Contract Management). It also offers nothing to suppliers about the benefits to them.

I think it shines a poor light on procurement practices. I also believe that with innovation in the supply chain there is an argument to say that there comes a point where you no longer need to reduce the number of vendors. In fact that point may now be a higher number! For example with good spend analysis the number of suppliers may well be irrelevant…..after all why cut off the source of innovation in the supply chain?

Entry Filed under: Analysts/Research, General, Global Supply Issues/Risk, Supply Management Best Practices, e-Sourcing Marketplace