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Suppliers as Your Partners in Cost Reduction
This article is one of the many articles still to come in which I will discuss very basic yet proven techniques that you could use immediately in your encounters with your suppliers. Oh but wait, to find any value in this article, you must be a firm believer that Purchasing strategies have evolved from just 1) focusing on price and 2) focusing on quality, reliability, responsiveness and total cost to a much broader focus of building supplier relationships. Did you know that for each $1.00 you save in your "total cost of ownership" reduction efforts, you will improve your bottom line profitability by $1.00? And did you also know that most companies do not get this concept and continue focusing their resources in all the wrong places? Now is the time when I want to share with you 4 basic rules that have proven to work and work very well to help you create the partnership relationship with your supplier and allow them to equally benefit from the experience as well. Rule #1: Getting direct cost savings is really a thing in the past. Getting savings has become increasingly difficult to achieve as your suppliers face similar predicaments themselves and operate with very little room in their margins to wiggle. Rule #2: To affect your bottom line, using 80/20 rule, work on reasonable incentives to approach your top 20 suppliers with and build a "preferred" supplier base. Rule #3: Communicate to your suppliers on "how to" earn a "preferred" supplier status and what is required of them to remain a "preferred" supplier. Rule #4: Tell your suppliers what's in it for them (WIIFT) as they partner with you and build a "preferred" relationship. To earn a "preferred" status means that your supplier will have the first shot to quote on new business, parts and project. In fact you can go so far as to create "earn a point" program every time you achieve your cost reduction goals using these techniques as they apply to your business. Supplier earns a previously agreed upon point(s) when: 1) Shared tooling costs or shared engineering costs on a project 2) Extended terms: 60 or 90 day billing terms for a period of one year 3) Certified as "ship to stock" on all supplied parts or assemblies for a period of one year and remain compliant for every year thereafter 4) Ship zero defects for a period of one year and continue as such for every year thereafter 5) Work with purchasing, manufacturing or engineering to add value Working with your suppliers to explore these techniques not only presents opportunities for you to reduce your "total cost of ownership" but also helps your suppliers to review, improve and streamline their processes and grow internally to be able to meet your expectations and earn that "preferred" supplier status. Use this "total supply chain cost" model as your guide to isolate and focus on the actual cost elements impacting your bottom line profitability. Total supply chain cost= Buying price= +Supplier performance cost +Cost of acquisition +Out-of-sync planning -Speculation returns +Speculation cost +Mfg. cost +Selling cost +Distribution cost +Profit =Selling price Vera Haitayan, Principal Consultant of The Leadership Laboratory., a California-based employee development and process improvement consulting firm and is the senior editor of The Stepping Stone Newsletter featuring leadership and process improvement best practices. http://www.1leadershiplab.com mailto: vera@1leadershiplab.com
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a href="http://www.elearn-university.com/Careers/coaching/index.php" class="nav">Coaching Managing the Sales Negotiation Process How many times have you heard: Barter: Its Not Just for Doctors Anymore Time was, in the country, the local "doc" was as likely to get paid with a couple of chickens as a couple of dollars. Doctors these days won't stand for that, of course, but while some people have moved completely away from barter and stayed there, others have embraced it wholeheartedly. Negotiating Tactics: Don't Let ?Good Guy Bad Guy? Control the Sales Negotiation Counter one of the classic negotiating gambits by addressing it directly. Cross Cultural Negotiations Cross cultural negotiation is one of many specialized areas within the wider field of cross cultural communications. By taking cross cultural negotiation training, negotiators and sales personnel give themselves an advantage over competitors. How to Change Somebody's Mind Believe me, it's not easy! And sometimes, it doesn't work at all. Communicating Across Time Horizons There was a time in my life when I sold life insurance. Well, to be frank, I tried to sell life insurance. With little success. National and Cultural Negotiation Style Cultural and national negotiation styles reflect communication behaviors and the priorities of that culture. Priorities such as trust, teamwork, non-confrontational situations, and openness are all along a sliding scale with each culture. The communication behaviors of each culture reflect these priorities and can dictate how a culture will engage in negotiations. Often, Japanese and other Asian negotiators will plan a social event and dinner before any real negotiations occur. Likewise, Americans place an emphasis on taking clients out to dinner and a round of golf. Engaging in this type of activity builds trust and opens the line of communication between the two parties. Using persuasive techniques to "connect" with another person can lead to trust and the sense of a relationship being built. The negotiation styles of these two cultures mesh well, thus allowing them to understand the priorities of each other's culture. Negotiations: The Art, Science, & Sport of Online Deals Negotiations can seem as complex as physics, and in fact, people go to college to study the science of negotiating just as they would the laws of nature. At the same time, negotiation is like an ancient art form, some sort of Zen mental jujitsu. When neither the Zen nor the science works, though, no one wins. How To Communicate Using Space What Is Proxemics? The Most Powerful Persuasion Skill Youll Ever Learn Criteria Elicitation Do You Want a Paycheck or a Passion? 10 Qualities Managers are Looking for in Hiring You Based upon my research of over 300 managers in the last two years, I have found what qualities are most important to hiring managers. 30 Tips for Keeping Meeting Expenses to a Minimum Money makes the world go 'round. And when it comes to meeting planning, money can probably get you whatever you want. However, few event planners have the luxury of an unlimited budget. Your boss may like to drink champagne on a beer budget. In other words, caution you to spend less, but expect miracles at the same time. Managing Conflict, in Life & Work: Using Ancient and Modern Approaches "Conflict" is a word that can have varying degrees of severity, meaning, and implication for each individual or circumstance. For example, the conflict that is experienced in our current, daily lives seems insignificant in comparison to the Samurai, or those in war, who faced death on a regular basis. However, it is still important to extrapolate the significant lessons that have been derived from such severe scenarios, as these notions are still applicable in the conflict that we experience in the workplace and life today. So Whats Your Argument? Arguments aren't always bad things. Sometimes They're used to convince someone of an important point they may not yet realize. How Barter Can Help Your Business Online or Offline How Barter Can Help Your Business The Art of Haggling Did you know that at one time in this country that there were no fixed prices on anything. You would go into a store and find an item you needed then you would begin the process of negotiating the price. This might seem foreign to us today, but it use to be the rule. In a later article I'll talk more about the history of price negotiation in this country, but today I want to give you some pointers about how to negotiate well. While Youre Waiting Not long ago, I made a partnership pitch, on behalf of an organization I represent, to another organization with similar interests. If the idea had come to fruition, it would have radically changed our organization. Writing an RFP (Request for Proposal) Proposal?! I panicked as I tried to confirm with him what he meant by that since I had never done one before, at least not as a freelancer. Secrets of the Trade Revealed: Bartering for Business In its simplest form, bartering involves an equal trade. One business swaps a good or service for another. A lawyer, for example, may swap a few hours of legal assistance for a stay at an out-of-town hotel. Are You Scaring Away Potential Customers? When you are trying to make a sale and ask someone to fill out a credit application and new account form, do your potential customers turn around and run to the competition?
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Comment by Robert Holleyman