Leveraging Suppliers’ Expanding Roles Can Benefit Your Business

The value of your company’s supply chain is evolving beyond cost-saving measures into more holistic procurement relationships that has become recognized as a fundamental enabler of business strategies. Suppliers are expanding their role into providing assistance in areas such as product development, process improvement and after-service support, according to the recently released Creating Value through Procurement and Sourcing Efforts in Integrated Supply Chains report by APICS and Michigan State University.

Leading companies now are taking active roles in using their suppliers to help them focus on proactive innovation and derive bigger-picture financial benefits. According to the 2015 ROSMA report by A.T. Kearney, the top quartile of companies leveraging broader partnerships from suppliers can expect to see a $12.70 return value for every $1 invested in supply management assets.

Many Service-based Companies Have Room to Improve

Companies in the manufacturing sectors are leading the charge in leveraging relationships with suppliers to provide added value, service-based companies are utilizing the more traditional approach. As such, there is opportunity for non-manufacturing companies to gain benefits beyond categorical cost-reductions found from the traditional bid process, if supply chain executives also consider the added services that a supplier can offer in relation to their bid price.

A Shift in Mindset can Lead to Long-term Benefits

Companies can work towards expanding partnerships with their suppliers by cultivating a mindset of what would make them a preferred customer to a particular supplier. One of the first steps is challenging the standard procurement procedure when interacting with suppliers and constantly find opportunities for improvement, incremental innovations and expanded services.

Additionally, understanding the reasons behind how the procurement process is conducted and implementing technology that can capture transactional data and break down the costs associated with product purchases. With this information, a company can define its intended procurement outcomes with a focus on value beyond unit price, which can help a company find areas for added benefits from a supplier.

By taking a value-driven approach throughout the procurement process, companies cultivate stronger partnerships with suppliers who focus on innovation within their supply chain leading to opportunities to enhance a company’s operating procedures well beyond procurement outcomes. 

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