Companies should maintain commercial pressure on their suppliers no matter how big they are, procurement consultants Efficio say in their latest Viewpoint article.
This means understanding their costs and the markets they operate in, setting performance priorities and considering competitive alternatives.
Author, Efficio Senior Manager Jose Oliveira, says it is often thought that putting commercial pressure on strategic, core suppliers is ill-advised and that hard negotiating with them will create a backlash resulting in loss of performance.
But experience suggests that commercial pressure should be applied to strategic partners just as much as smaller, more easily replaceable suppliers.
In the Viewpoint, titled “Core suppliers: keep up the pressure!” Oliveira says there are often barriers to treating big suppliers critically including the potential costs of switching to different sourcing partners.
An assumption is often made, without market testing, that a large supplier’s extended range of cross-portfolio services can deliver beneficial synergies.
Efficio advises companies to take time profiling their suppliers, their costs and the markets they operate in.
“There is no contradiction between treating big strategic suppliers in a commercial way while maintaining positive long-term relationships,” the author says. “An uncritical partnership is in no-one’s interests.
“Articulating and deploying a powerful supplier strategy will bring a productive two-way relationship with a key supplier to a higher level to the benefit of both buyer and seller.”