Implementing A Better Supply Chain Strategy Can Save You Money

May 16, 2012 by  Filed under: Management 

A well-planned functional quality managed supply chain strategy is an essential part of any company’s profit strategy. Proper management of your relationships with suppliers and service providers is an essential part of your profit.

Designing a strategy that optimizes you supply chain depends on getting the best pricing from suppliers and service providers, optimizing just in time delivery, and developing a quality system that tracks the cost effectiveness of the supply chain strategy that you develop. All these steps have a cost and all these steps should be designed to produce lowered costs and higher profits. Profit is the reason you are in business.

Managing suppliers and service providers depends on the business you are in, the time frames that production involves, and the demands of your customers. Each business is different but most operations share the same obstacles and can benefit from implementing similar solutions.

One strategy that works well in getting the best possible pricing from suppliers and service providers is to get individual quotes from each prospective vendor. Your next step is to cull the candidate list down to three or four based on price. Then next step is to arrange a meeting with the top potential suppliers all together in the same room. The margin that suppliers have to play with in offering you a decent price for goods and services is the salesman’s commission. A salesman’s ego is your best advantage in getting the lowest price and the best terms in a meeting where your list of potentially preferred suppliers compete head to head. The salesman’s loss in commission is your profit.

Another cost cutting measure is the elimination of sales perks given to your buyers and department heads. The perks can vary in form but usually include lunch for several people on a weekly basis. Tell the salesman no more lunches and get the cost of those lunches and any other perks deducted from what you pay for goods or services because the price of the free lunches and perks is added to what you pay for goods and services.

Watch out for the slick sales gimmick that involves contributions to your favorite charity. Any contribution made to a charity by another supplier on your behalf loses your company money. You lose the tax deduction for charitable contributions and you pay the cost of the charitable contribution back in higher pricing.

You must track the cost effectiveness of each change you make. This is a simple matter of setting up a tracking system that documents the time you made any changes to your vendor management plan and track the results in terms of money. This tool tells you if your program is succeeding and is an indicator of when to make changes to improve your profitability.

Tracking just in time performance by your vendors will provide you with the information necessary to select the supplier that provides the most optimal delivery that reduces your inventory costs and increases your profit.

If you are changing your supply chain strategy, a conference can be a great way to learn about what is working in this economy.

Article Source:
http://EzineArticles.com/?expert=Jeremy_B_Thompson

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