The improving global economy is pushing prices up – but too much focus on price can blind buyers to the value they can gain by working with suppliers, say procurement specialists ADR International.
One of the lessons learned from the last downturn should be that there are forms of value other than low cost that suppliers can offer, says Bill Michels, CEO of ADR North America.
In the latest issue of the ADR International e-newsletter, Looking after business in 2011, Michels say there are already signs that US companies are refocusing on price, including arbitrary year-on-year percentage reductions.
In his piece, Managing value in a rebounding economy, Michels writes: “While there is merit in conditioning suppliers with a cost-saving message, their profit margins are not an infinite source of savings for buyers.
“Most suppliers will have survived the recession by cutting their overhead and profit margins razor-thin. New orders have the potential to be very profitable, based on the lower overhead.
“On the other hand, insisting on price reductions when margins are already thin can push a good supplier out of business – or to a rival customer.”
Rebecca Howard, director of ADR Learning, the training and development division of ADR International, says many procurement professionals are funding their own training for qualifications while doing in-house training schemes at the same time.
She says many employers prefer to run their own schemes because they are more focused on the immediate needs of the employee, but the individuals concerned often want industry-based qualifications because they are widely recognised.
In her piece, Two routes to qualified status, Howard concludes: “The solution for many aspiring purchasing professionals is to opt for a lower-cost route to recognised accreditation of the kind now available. They are prepared to make this investment out of their own pocket because the qualification will earn it back for them in an enhanced salary.
“In-house training can be undertaken at the same time, and the level of commitment to do both demonstrates personal tenacity to employers and internal colleagues.”
ADR Sourcing consultant Tera McKeen says procurement people can help deal with the challenge of dramatically rising paper prices by challenging suppliers.
“It is essential for the paper buyer to gain an insight into the best possible way to target areas of cost reduction by understanding how various cost components contribute to the supplier’s price,” McKeen writes in her piece, The big paper chase.
“If you are not already operating in an open book environment where you know what proportion of the supplier’s costs raw materials, production, energy, transport, profit margins and so on represent, a cost breakdown will give you a clearer understanding.
“This will help you focus on the supplier’s motivation: to what extent are their increased costs justified? Don’t be afraid to challenge the price increases.”
Please view ADR International’s January 2011 e-newsletter Looking after business in 2011 at www.adr-international.com/newsletter
About ADR International
ADR International is one of the world’s longest-established global procurement consultancies, helping clients improve every aspect of their procurement activity. Its main areas of expertise include procurement transformation, training and development, sourcing, permanent and interim recruitment, technology and audit.
Clients include GE, Pfizer, Nokia, CRH, Raiffeisen Bank, TNT Express, Tiger Brands and Eskom. ADR International also works with public sector organisations in local government, policing and the UK’s National Health Service.
ADR International is headquartered in London, UK and ADR North America is based in Ann Arbor, Michigan. ADR International also has offices in Australia, South Africa and Czech Republic.
+ 44 (0)208 348 3103 or 07906 720141
ADR International (North America)
Tel: +01 (313) 402-9831
This press release was distributed by ResponseSource Press Release Wire on behalf of Headline Media Ltd-ADR International in the following categories: Business & Finance, for more information visit https://pressreleasewire.responsesource.com/about.