Supplier Collaboration: A Strategic Imperative

Shorter lead times, shrinking product lifecycles, global outsourcing and increasing complex customer demands are making manufacturers more dependent on their suppliers to keep the costs down and to optimize quality and responsiveness. Supplier-facing business practices like supplier consolidation, strategic sourcing, collaboration, contract and performance management-enabled by Supplier Relationship Management (SRM)-reduce the overall spend, promote product development, minimize the risk of non-compliance and streamline the supply chain operations.

In addition to the growth in top line, it is the bottom line results that the stakeholders are interested in. Ultimately, that is the focal point of every company competing in today's tough economy. You can improve the bottom line in two ways: Increase revenues or decrease costs. In today's sluggish economy, revenue growth is the most challenging. Fortunately, the cost reduction side of the equation is more promising because by reducing the costs associated with the purchase of goods and services, an organization can boost profitability without generating more sales. Such bottom line performance pleases the shareholders and keep the organization competitive in the market.

Transformation of suppliers as key strategic partners of the business enterprise has become a mandate to gain cost and competitive advantage. As per the current estimates, sourcing accounts anywhere between 70-80% of the total opportunity for procurements savings within an enterprise. This requires a balancing between cost reduction against issues of quality, risk and innovation. Supplier Relationship Management (SRM) practices/solutions help strike this balance using a systematic approach for formulating and optimizing a global sourcing strategy, and help evaluate the capacity of supplier to deliver high-quality goods that may have specific corporate needs.