In this day and age, supplier costs typically account for 40-70% of a company’s total cost, underpinning the cost dependencies companies have on their external supply partners. Extracting value from the supply base is increasingly difficult as prices have already been squeezed and new savings opportunities are increasingly difficult to identify. Procurement departments have already made large investments in sourcing and procurement systems with the promise of consolidating spend and the supply base, achieving leverage, identifying the appropriate suppliers, and using e-sourcing to obtain the best price – all with the goal of significant savings. Yet CFOs question why the savings “on paper” are never realized to the bottom line, and organizations seek new strategies to lower supplier costs.
Procurement effectiveness is reliant upon the ability to access purchasing leverage, identify savings opportunities, and negotiate optimal terms (price, payment terms, SLAs, etc.). If Procurement is not equipped with the best possible information, or lacks the time to mine for the information, it cannot execute as expected. If, after preferred suppliers are put in place, early-payment discounts cannot be captured or individuals buy off contract, the savings are never fully realized.
Strategic suppliers can benefit from the knowledge and development of those who have already succeeded. As such, many supplier-development programs have been effective, enabling suppliers to streamline and improve their operations – and reduce costs.
HICX understands the need to lower supplier costs through efficient supply base management. We provide the following solutions: