Operations Payoff

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How Supplier Partner Programs Can Reduce Materials Cost Volatility

There are a number of ways to reduce materials costs or at least make them more predictable in volatile times. One method is supplier partner programs. Many companies try to cut materials costs by being “tough negotiators,” but in truth they could get lower prices by inviting their suppliers to be part of the team.

Inner Circle

In supplier partner programs, companies bring suppliers into the inner circle, including them in product design efforts, communicating with them continuously, and providing detailed sales/product forecasts. The supplier wins because they know they’re getting the lion’s share of the company’s business for the part or service they provide.

Win/win

Partnerships start by rationalizing the supplier base; reducing the number of suppliers for a particular commodity to a few certified, developed and trusted suppliers. Purchase volume per supplier goes up, materials flow is smoothed and the total cost of ownership drops significantly. As if that isn’t enough, supply chain reliability goes up and risk goes down. A true win/win for everyone!

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