Good Times, Bad Times

June 13th, 2008 at 07:38am Oscar Pacheco - Iasta

I have noticed that most companies tend to start cost savings and efficiency efforts when things are not going well in their market sector or in the economy overall and they usually start by trying to save money on supply cost.  This means reducing supply or reducing the cost of supply, which can be very difficult in a tough market. 

Suppliers are impacted by this in the same manner as a buyer and they in turn try and reduce their costs as well.    During the good times, buyers are mainly interested in maintaining a steady supply to feed production and are less concerned with cost savings.  Suppliers tend to increase pricing (if possible) since the demand for their products are generally high and they get many more single source opportunities rather than competitive bids. 

These are the two extremes in the supply chain market and it feels like we either live in one or the other.  Companies tend to start sourcing programs during the bad times (which is the most difficult time) and tend not to do them during the good times (don’t want to jeopardize my supply). 

I believe it is always the right time to do the right thing.  Purchasing groups should always be looking for cost savings and should always strive to be as efficient as possible.  Whether this means always bidding contracts competitively, using sourcing tools, starting strategic sourcing projects, or any other effort that a company may undertake, it is always the right time to start.

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Entry Filed under: General, Supply Management Best Practices