Competive Advantage by Supplier

What is the role of SCM and Purchasing for innovation and competitive advantage?

Today, many firms relegate SCM (incl. Purchasing) to a tactical level operating in a “silo.” Because their mission is limited to one thing: efficiency in the way of low piece prices and operational cost.

The result: The “pricing game!” Suppliers start high, buyers negotiate down, everyone gets a bonus, the price is low, but often so is the value received. Next to price, a valuable supplier can offer a lot more value: innovation, quality, speedy delivery and risk reduction.

Sure, there is a basic necessity to negotiate low prices for commodity goods and services. However, strategic suppliers and their innovative products require a partnership approach. While these suppliers comprise only the top 5-10%, they often contribute up to 50% or more of the cost!

Until lately, CEOs spent only 1% of their time on these strategically critical processes. To unlock the value requires working with suppliers as partners and they will contribute – next to a low price – innovative ideas, risk mitigation, quality, speed and a sustainable competitive advantage.

Therefore, the role of SCM and Purchasing must be moved up to the strategic executive level. This ensures that the company’s top suppliers are positioned to deliver high value and competitive advantages year after year.

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