New opportunities through a change of supplier
Since Corona, global procurement development has been in fast motion – and it is worthwhile to continuously review purchasing relationships. A change of supplier can offer great opportunities for returns. In this article you will learn about the advantages of a change and the challenges that need to be considered.
Situation on the procurement market: New scope for buyers
The virus has shaken up the world economy. In some cases, goods from suppliers are no longer accepted at all. The uncertainty often leads to lower orders with effects far into the next year and the year after. As a result, forces have shifted and buyers have more room for negotiations with suppliers.
Reasons for a change of supplier
The reasons for a change of supplier are often influenced by the customer’s product technology. Customer innovations lead to specification changes of the goods that the supplier must purchase. This means that technical drawings and data sheets must be adapted. This also requires the corresponding technical competence of the supplier.
Other reasons are capacity utilization and reduced quantities: The current difficult order situation may result in lower capacity utilization in the own company and force a new quantity planning.
Of course, the determination of quantities also has an influence on the selection of a supplier. In the best-case scenario, the supplier must be able to fulfil them as desired. Do you rather need a supplier for large quantities or one for smaller quantities? Accordingly, the economic batch size is very much in the foreground. Therefore, the question arises in this context is how the supplier’s company is positioned: Which lot size can the supplier produce most economically – and does the lot size of another supplier perhaps fit better?
All in all, there are various parameters that can be a trigger for a change of supplier in the current situation.
In addition, it can also be determined for suppliers who have had extremely high order backlogs in recent years: Many companies have forgotten how to sell. These suppliers no longer know what is happening on the market. So they do not know new customers that are interesting for them and would actually need intermediaries. They have also missed out on innovative developments. For years they were only concerned with optimizing their own margins.
Change of supplier: The advantages
It should of course be possible to achieve lower costs by changing supplier. This is not just a matter of the unit price, but of a TCO consideration – total cost of ownership means taking the total costs of capital goods into account.
In addition to lower costs, other advantages such as more reliable supply, better quality and the issue of social responsibility can play a role. In view of foreseeable developments in the German legal situation, taking social and ecological aspects into account will probably soon become mandatory.
If you can find a supplier who is closer to your own supply points, this can lead to lower costs on the one hand and on the other hand have a positive effect on the topic of CO2. Although the corona crisis has made the sustainability debate quieter, it can be assumed that the issue will become increasingly important again.
When changing suppliers, it can therefore make sense for a company to look at its global footprint, i.e. its ecological footprint, and ask: “Where do you buy from? How many kilometers do the goods travel? Is that really necessary?” It may be possible to achieve one or the other CO2 target by switching to a shorter delivery route. In this way, the respective company can reduce CO2 emissions – just by changing supplier.
Challenge: processes, data, reliability
What do I have to consider when changing suppliers? Of course, there are some challenges, but they should not discourage you. To know whether a supplier is a good fit for your company, you first need an overview of your own requirements.
The biggest challenge here are the own purchasing processes. These must be re-examined from the very beginning. For example, how is the supplier approval process carried out? This also includes the corresponding qualification of the suppliers. Who ultimately releases the goods? The purchasing department should define a precise procedure for checking and releasing a new supplier.
Therefore, the own data management is of great importance. How good is the data? Good data serve a proper analysis and preview. This is therefore closely linked to quantity planning.
As with friends, honest communication with suppliers is also important. This should be transparent and clear. This is particularly important when looking ahead to future joint business. After all, you are offering the supplier a new business opportunity. Here, clear agreements can avoid excessive expectations that may not be met. In principle, openness is a good basis for successful cooperation.
In a nutshell, it can be said that processes, data and reliability play a very important role.
Focus on success: Helpful partners
Strong partners like Kloepfel Consulting can help you to overcome the challenges and take advantage of all the benefits.
In this way, you also save your own staff capacity, which might not be sufficient for a comprehensive project. External help enables companies to carry out a change in a reasonable and manageable period without restricting their daily business. Overall, the use of a competent consulting firm can be very helpful here.
Requirements of a strong partner
There are a few basic requirements to be observed: The most important is appropriate know-how, i.e. knowledge of the market and knowledge of the processes involved in changing suppliers. The routine of identifying, auditing and qualifying new suppliers is at the top of the list.
Experience in market research is extremely helpful. A competent partner like Kloepfel Consulting has knowledge of many details in the procurement market. He can create complete lists of suppliers for desired product groups.
The consultants of Kloepfel Consulting know the world and many important suppliers. Thus, purchasing in foreign countries can be started and cultural differences are considered, because the consultants speak the local language. This simplifies communication and strengthens the processes.
Overall, an external partner can better assess the chances of success and help to realize them.
Conclusion
It is worth considering a change of supplier in concrete terms and, if necessary, initiating the change. A regular change of supplier maintains the positive tension in the relationship between supplier and customer. If, on the other hand, existing suppliers have a sense of security, the customer is at risk of being exploited. Showing that suppliers are not without alternatives can help here.
In conclusion, it can be stated Purchasing should always keep its eyes open in the market and not be afraid to regularly bring “fresh blood” into its supplier landscape. External partners can provide competent advice on the individual steps of a change of supplier and significantly increase the chances of success.
Author: Thomas Wandler, Senior Partner Kloepfel Consulting
Press contact
Kloepfel Consulting GmbH
Gerrit M. Schneider
Press officer
T: +49 211 / 882 594 17
Mail: gm.schneider@kloepfel-group.com