Procurement: North American Supplier Consolidation
North American Trend: Materials Supplier Consolidation
Problem:
In many industries supplier options in North America have been declining. Manufacturing consolidation is a trend that reduces competitive options to materials procurement specialists, especially in the small to medium sized enterprises (SMEs). The consolidation of any supplier manufacturing base reduces the competitive options for the supply of materials, shifts the negotiation power in the hands of the suppliers and worst of all it may re-classify a customer as too small and be re-directed to purchase their
materials requirements from an approved more expensive option – a distributor.
Solution:
The procurement specialist must expand the procurement options to include a suppliers from foreign markets. For any large manufacturer, they easily can pursue this option, but for SMEs this can be a major challenge. Searching for and approving a foreign supplier can be frightening and require that many of the company’s support systems to change. Sourcing from offshore manufacturers usually requires travel to countries, different culture and language, different manufacturing specifications, longer turnaround times
and a significant shift in how payment terms are handled. However, adding foreign suppliers options to a material supply base can do the following:
- Enhance their negotiation overall position
- Participation in the global procurement market provides access to a broader information base and understanding of material costs
- Can procure or shift materials requirements to reflect best cost options at any time
- Can inventory balance local and offshore materials to ensure best low cost averaging position between local and offshore suppliers
- Enhance the company’s competitive position to its customers and reposition to capture new business and market share