From focusing on the unit price of the product to focusing more on the total cost of the supply chain.
Traditional procurement focuses on the unit price of the product because it is the most “simple” thing. Cutting the price with the supplier is like squeezing water on a wet towel. There is always a squeeze.
However, with so many years of business development, costs are almost transparent, and supplier profit margins are also approaching the life-and-death line. In this case, the effect of staring at the unit price of the product is no longer significant, so traditional procurement has to be forced to strategy Procurement transformation, pay more attention to the total cost of the supply chain.
What is the total cost of the supply chain?
The purchase cost is the price of the product. The chain cost is the cost incurred when the product flows on the chain. Transaction cost, that is, the cost of facilitating the transaction.
The number of suppliers has changed from more to less or even unique, from more than one product to one single product.
Traditional procurement advocates “multiple children, more blessings” and “raising children to prevent old age”. In their perception, the more suppliers, the better, so that if any problems occur, they can reduce risks due to decentralized procurement.
But this approach essentially replaces management with elimination, which is a manifestation of the lack of supplier management capabilities.
Strategic purchasing is aware of this problem, so he will reduce the number of suppliers, or even only one supplier.
However, this only means that there is no choice, but among a sufficient number of potential suppliers, after scientific evaluation, they finally chose a “marriage”, and the two parties have reached a long-term cooperative relationship.
The relationship with suppliers ranges from short-term transactions to long-term cooperation.
When there is a problem if the supplier knows that there will be no more opportunities for cooperation in the future, do you think he will still take responsibility and solve the problem? Yes, but the probability is not high.
This is why many suppliers like to “deduct compensation in the next batch of orders.” Long-term cooperation can give suppliers a sense of security, effectively avoid risks when problems occur, and prompt suppliers to actively solve problems and reduce long-term costs.
Strategic procurement sees this point, instead of throwing out a big knife at every turn, spending a lot of time and energy to source new suppliers at every turn.
What supplier should do?
It can be seen that the ranks of purchasers are becoming higher and higher, and the requirements for suppliers are naturally higher and higher. Like many purchasers were just looking for someone to fall in love with, so naturally beautiful is enough (low price), but now they are looking for is someone who can get married for a lifetime. Being beautiful is not enough, and even being beautiful is no longer the main factor.
If suppliers continue to stay in the low-level sales model of the past, sooner or later we will be eliminated.
Therefore, suppliers must have the ability to meet purchaser needs and continue to create value for them, so that we can be regarded as truly competitive sales.
What service IDEAL can supply?
Giving our best solution based on the professional experience
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