This is the third article of a four part series to describe the four main pillars that successful businesses should focus on to improve profit, growth and become more efficient.
This topic describes Suppliers. Suppliers are a key requirement to the needs of any organization. There are many different types of suppliers that complete the repertoire for organizations, including everything from hydro through to key part suppliers. All suppliers used by an organization require management as well as validations and controls.
Creating strategic relationships with critical suppliers provides stability to the supply necessary to meet the needs of the customers. Many organizations beat up their suppliers year after year for price reductions, but while doing this may not consider the potential impact. Smaller suppliers may not be profitable any longer and will be driven out of business, while larger suppliers may decide that lower quality product or longer lead times will offset the cost reductions. In these situations, everyone loses.
When creating strategic relationships cost should not be the only factor. Other key decision factors would include quality, just in time delivery, and low administrative maintenance to name a few. In fact a supplier balanced scorecard should be considered to monitor the key suppliers over time. Even more critical is to review and meet with suppliers at least annually to ensure that the supplier understands the dynamic needs of your organization and what role they play in ensuring that long term strategic value is being delivered.
Suppliers who take up precious resources with quality defects, late deliveries as well as administrative errors impact overall profitability. Does your organization have any suppliers like this?
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