Title: The New Customer of Choice Imperative: Ensuring Supply Availability, Productivity Gains, and Supplier Innovation
Abstract: Rising commodity prices, tightening labor markets, an increasing reliance on suppliers for cost savings and product innovation ideas—all of these contribute to a shift in the balance of power toward suppliers in a sellers' market. This shift is causing progressive supply professionals to rethink the way they structure and manage relationships with suppliers, in order to ensure their company can secure disproportionate access to scarce supplier resources (materials, services, or ideas) at the times they're needed the most. This paper and the presentation will outline the criteria suppliers use to make decisions about so-called key account treatment and customer prioritization. It will also explore elements of effective tactics to build and maintain customer of choice status, based on demonstrated best practices from leading supply organizations. Introduction. An upward trend in commodity and services prices alike over the past three years, compounded by recent challenges in securing supply availability, all signal a shift in market power toward suppliers. This shift is happening at a time when in many ways, companies are more tied to suppliers than ever before - as indicated by the rise of contract design and manufacturing, the spread of complex EDI systems that span nodes in the supply chain, and the dramatic increase in the average company's spend accounted for by outsourced services. One consequence of this change in power dynamics is that in spite of recent successes, corporate savings rates are decreasing; in one recent survey, over 50% of large global companies say they have experienced a decrease in year-over-year cost savings rates from 2004 to 2005. In addition to diminishing savings rates, more and more supply organizations are reporting negative outcomes of other kinds as a result of the shift toward the sellers' market, including missed innovation; paying higher prices than peer companies (or competitors) for core products or services; or disruption of operations. This phenomenon is happening across industries and around the globe, to large and well-known companies as well as small players. The negative results range from higher costs to lost revenue, leading to, at its worst, a loss of competitive advantage in the marketplace.
Publication Year: 2007
Publication Date: 2007-01-01
Language: en
Type: article
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Cited By Count: 26
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