Sony to Slash Suppliers by Half to Cut Costs

Company will keep 1,200 suppliers from the current network of 2,500.

Sony Corp., facing a second year of losses, said on May 21 that it would cut its number of suppliers by more than half to reduce procurement cost by $5.3 billion a year.

The media-electronics giant, which recently announced its first annual loss in 14 years, will keep about 1,200 suppliers from the current network of 2,500, a company spokeswoman said. The company aims to cut procurement cost by 500 billion yen, or about 20%, in the current fiscal year amid fierce price competition.

"We plan to purchase parts and supplies as 'Sony group', rather than individual business groups making separate orders," she said. "By reducing the number of suppliers, orders to individual suppliers should increase. This should allow us to negotiate lower prices."

"If the prices of the final products fall, we must also find ways to reduce production cost," she said.

Chief executive Howard Stringer is under pressure to turn around the company as it heads for its first back-to-back annual losses since it was listed on the stock market in 1958.

Sony logged a net loss of 98.9 billion yen (US$1 billion) in the fiscal year to March and expects to end this year 120 billion yen in the red.

Sony is cutting 16,000 jobs and axing about 10% of its manufacturing plants as part of efforts to reduce costs by 300 billion yen a year.

The company has had a difficult few years in the face of tough competition from rival products such as Apple's iPod and Nintendo's Wii.

Copyright Agence France-Presse, 2009

TAGS: Procurement
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