Supplier Power: The New Competitive Differentiator

This is an excerpt of the original article. It was written for the March-April 2015 edition of Supply Chain Management Review. The full article is available to current subscribers.

March-April 2015

Anyone who’s ever bought a house knows the realtor’s motto: Location, location,location. It’s the most important factor in determining the value of a property. Based on the press releases that come across my desk these days, supply chain’s motto is: Innovate,innovate, innovate. This issue includes approaches to inventory optimization, contract management with third party logistics providers and contract manufacturers, and the Goldilocks approach to supply management—an innovative concept aimed at keeping your procurement department from running too hot or too cold.

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For the leading companies identified in A.T. Kearney’s 2014 Assessment of Excellence in Procurement (AEP), supply management is not just a way to cut costs—it’s a strategic capability that can also drive sustainable earnings performance and competitive advantage through supplier-driven innovation and risk management (see sidebar).

The success formula covers three pillars: category excellence, high-performing teams, and supplier excellence. The first pillar, category excellence, can double the level of cost reductions through an analytics powered sourcing process combined with long-term category strategies.

The second pillar, team excellence, gives procurement a seat at the C-level table, allowing procurement to focus more on strategic activities such as sourcing and supplier relationship management (SRM), and better measure its impact on the organization, including cost reductions and value beyond cost.

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