Segmenting the Supply Base to Improve Resource Allocation
Procurement has played a key role in meeting their companies’ ambitious cost-cutting targets over the past several years. Utilizing recurring negotiations with suppliers, buyers have achieved repeated discounts. But as deals with suppliers have matured and the economy stays unstable, negotiators are finding it increasingly difficult to replicate earlier wins. Buyers face continued pressure from their companies to continue to drive down costs, they are increasingly resorting to high-pressure tactics to squeeze more concessions out of suppliers. At what cost to long-term, sustainable savings and continued product/service quality?
For some companies, this “zero-sum” approach continues to deliver the goods (at least for now), but for many such tactics are failing. These tactics are failing to deliver the targeted cost savings, product/service quality suffers, supplier’s ability to stay viable is jeopardized by revenue impacts, and innovation is compromised on both sides as cost becomes the primary focus.
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