Companies Having Troubling Supplier Relationships

More than 90% of the U.S. companies surveyed by Stamford, Conn.-based Archstone Consulting reported having problems managing their suppliers.

"Our research shows that while many companies have conducted strategic sourcing and outsourcing to reduce costs, few have mastered Supplier Relationship Management (SRM) as a critical part of enhancing their supply chain and reducing overall costs," explained Ramin Tabibzadeh, a principal with Archstone Consulting and co-author of the study.

According to Len Prokopets, a director with Archstone Consulting, "Companies lacking key SRM capabilities such as supplier stratification, supplier governance, performance management, and supplier development often have inefficient relationships and are unable to realize the full value of their supply base."

Specific challenges identified in the study include:

  • 58% of respondents reported having SRM practices that are inconsistent across the organization, inefficient and overly tactical.
  • 58% of the respondents reported an inability to hold suppliers accountable.
  • 49% of respondents reported difficulty with allocation of supplier management resources, often leading to too many vendor managers.

While most SRM initiatives appear to be in their early stages, respondents that have launched SRM initiatives have achieved significant benefits including; a 7-11% reduction in cost of delivery, 9-13% reduction in cost of quality and a 10-14% reduction in procurement headcount.

Archstone Consulting LLC

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