A Perspective shared by DSSI’s Director of Global Category Management, Michael McFerrin I sat down...
Price is key... only after the product is delivered
A lot has been said lately about reversing the trend of keeping suppliers at arm’s length.
Many companies are finding that bringing their suppliers into the conversation can lead to sustainable supply chains and considerable overall cost savings. But in the world of MRO, where one company can literally have hundreds or even thousands of suppliers, how do you begin to create an effective supplier management program?
With all of the sourcing options including OEMs, integrated suppliers, and general distributors, it’s difficult to put together a comprehensive indirect procurement program that can satisfy both corporate objectives and site needs. Many procurement teams find themselves caught in a cycle of sacrificing price for service, or worse, service for price. It takes a clearly-defined centralized strategy and strong leadership to create a successful procurement program, something not always given priority in the MRO world.
So where does a good supplier management program start?
An initial supplier qualification process is integral in setting the baseline for both pricing and service levels. This can be a challenging process right from the start if your organization has operations in different geographical areas or usage differs greatly among plants. De-centralized indirect procurement is not uncommon because of the belief that plants can buy best in their area and that centralized buying would be too large of an undertaking. Although this may be an effective strategy if indirect spend is limited, significant opportunity exists in evaluating the entire indirect spend of the organization to realize the benefits of aggregation of pricing and processes. Many suppliers appreciate the value of aggregation as well and will work to put together a program that works for your entire organization; which is why DSSI’s sourcing model has had such great success!
DSSI takes supplier management to a whole new level by fully vetting all suppliers on behalf of its clients. Because DSSI acts as an extension of its clients’ buying teams, it measures and tracks KPIs like pricing, response times, shipping times and more throughout the year to ensure proper compliance. All of this information is available on demand in Epic®, DSSI’s e-procurement tool, and is reviewed quarterly with clients. Having this information on hand also allows DSSI to remain supplier agnostic and build a process around buying in a way that is best for the organization as a whole.
DSSI’s strategic suppliers appreciate this process as well since it ensures their ability to obtain more business through our client relationships as long as they can meet the documented expectations. Through this partnership, DSSI is able to consistently achieve 13-17% initial cost savings for its clients. To learn more about how your organization can benefit from DSSI’s trusted network of suppliers or include your current suppliers in DSSI’s source-to-pay process, visit our Strategic Sourcing page or contact us directly.