While procurement staff interact with suppliers as part of their standard activities on most days its often somewhat of an overlooked oppourtunity. While we get caught up in the transactional nature of our function it’s often missed that procurement staff have a lot to learn from their suppliers.
Buyers should not merely look at their suppliers from a transactional standpoint but look to what strategic information can be obtained during undertaking their routine tasks. The information can provide a tremendous advantage if captured and utilized in the right way.
Why is this? Well without a doubt, suppliers will generally know more about the product and market than their buying counterparts. While this might hurt your sense of pride it’s generally true, and my young padwan you have much to learn!
So what are the key 5 facts that buyers should focus on learning from their supply base?
1/ How requirement (design) influences price – suppliers usually have fabulous knowledge of the cost build-up of a product, how much for the raw materials, how much labor gets applied, how much it takes to assemble the product. This can be key if you’re looking for cost down opportunities.
2/ The most Optimum / Economic order quantities – Sure you know your requirement but do you know what would happen to your price if you optimized your order quantities? Your supplier does, so ask them!
3/ Lead time assessment – so you want to reduce lead time – who do you ask? That’s right the supplier, usually, they’ll understand how a lead time is constructed and why it is that horrendous figure you don’t like. Want to reduce it? – work with the supplier to understand what can be tweaked to bring about that lead time reduction you crave.
4/ The level of product risk – it’s often overlooked but a failure to evaluate (and mitigate) risk can bring about a supply chain’s downfall. Want to know those key risks and issues that are likely to impact you? That’s right, you guessed it – ask the supplier for their input.
As you can see valuable information is held within the supply chain. It can offer your company real competitive advantage if utilized in the right way. The first part is to identify how the supplier can help you, the second part is to ask.
You think there’s other valuable information held by the supplier? We’d love to hear what you think – feel free to add them in the comments section below.