Why Strategic Sourcing Works

I saw a discussion recently on LinkedIn discussing why companies are turning toward having a few preferred suppliers rather than selecting items on price alone. This strategy is known as Strategic Sourcing. The question spurred quite a discussion.  Here are some of  the key points.

Price alone has nothing to do with material standards, product quality, or timeliness of delivery. Most often a manufacturer can excel at two of three key things…price, quality or service. A savvy buyer develops relationships for their company that balance all three.
Consolidating vendors helps reduce costs, and increases price leverage opportunities. A reduced vendor base can also help focus the procurement department’s ability to focus on quality, service and pricing.
Once you have developed a relationship with a supplier and know that they are reliable, you are often able to negotiate better pricing than they would offer to others. Another reason is that they know that you can deliver, such as paying on time,  which further solidifies their willingness to do business with one company over another. It goes both ways.
The simple answer is “Value.” Preferred suppliers are chosen for many reasons including: pricing, quality and service.  Some companies sell strictly on pricing and the notion that “you get what you pay for” usually holds true. I suggest that you demonstrate value and you may get more results than strictly pricing.
With a few preferred suppliers you can develop a kind of partnership which means long-term benefits for both parts, a win-win situation. Along with your supplier you can sometimes even develop or change products by using your joint knowledge and other things that you are unable to affect if you are frequently changing suppliers.
The movement toward fewer preferred suppliers is a […]

Online Shopping: Eight Benefits for the Consumer

There are a number of arguable benefits to the consumer of online shopping verses traditional brick and mortar stores.

1.  Convenience and time saving – Shopping on the Internet can save time. A consumer does not have to travel to a store or adjust his schedule around the store’s hours. No longer does a consumer have to wait on hold for a customer service representative to answer the phone. Without leaving their home or office, consumers can access thousands of Web sites to become informed about breaking news and events, research products, and purchase everything from groceries to books to insurance policies.

2. Broader selection – The opportunity to find specialty items not readily available in ordinary retail outlets. This is especially true for consumers who live in small towns or rural areas where retail shopping is limited.

3. Global choice – Shopping is no longer limited to the stores within a reasonable driving or walking distance or to the catalogs they receive in the mail. Online, customers can shop at stores in other states or in other countries.

4. Better information – Access to a fuller range of information about product availability, descriptions, reviews and pricing.

5.   Lower prices – Some Internet retailers offer discounts from traditional channels (online booksellers, buying and selling stocks through the Internet). Some Internet retailers are starting to swallow shipping fees to capture customers. Users can access most online news and information free of charge. This element is of greatest power and appeal in influencing the habits of consumers.

6. Rapid response time to needs – eCommerce allows traditional supply chains to be shortened (direct shipping from the manufacturers) or even completely eradicated (digital goods such as software, music, info). This […]

By |November 11th, 2011|General|0 Comments|

The Impact of eCommerce

Over the last 15 years, eCommerce has fundamentally changed the way we buy things. Before the advent of eCommerce,  individuals and businesses looking to purchase items were forced to either shop from store to store, or search through stacks of paper catalogs and then call the merchant to order.

Now you can sit at a computer in the convenience of your home or office and purchase things from all over the world.  They will arrive at you home or office in 2 to 7 business days or overnight for a little extra money. This has been a boom for the both the consumer and the business person, particularly the small business owner. Instead of setting up a brick and mortar storefront, many small businesses start with an online store. They have immediate access to millions of customers who might need their wares. Consumers who live in smaller communities have easy access to goods and services that might not be available locally.

Although online sales have steadily increased since the advent of the internet and are expected to increase into the future, event more sales are influenced by on-line research. The Forrester Research Group did a resesent study of s web-influences sales. While $155 billion worth of consumer goods were bought online in 2009, a far larger portion of offline sales were influenced by online research. Forrester estimates that $917 billion worth of retail sales last year were “Web-influenced.” It also estimates that online and Web-influenced offline sales combined accounted for 42 percent of total retail sales and that percentage will grow to 53 percent by 2014, when the Web will be influencing $1.4 billion worth of in-store sales.

There is a lot of room for improvement in helping […]

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