Super Suppliers May Be Key to Cost Reduction

Thursday 24th of March 2011 09:56:19 PM

Super Suppliers May Be Key to Cost Reduction

The fallout from the recession is both good and bad. Declining retail revenues has forced many retailers out of business. On the other hand, the push to find new ways to cut costs is creating a whole new supply chain concept. Super suppliers just may be the wave of the future because they are able to supply goods quickly and inexpensively without a lot of overhead.

Those white t-shirts consumers buy in the millions are the end result of a long process of production and delivery. Retailers are unable to carry a large stock of goods like those shirts during declining economic times because they can’t afford to keep their cash tied up in inventories. What is needed are nimble suppliers that specialise in global shipping of goods and can fulfil orders with short lead time.

As the UK managing partner of KSA, Helen Mountney said, “Every week saved in the production cycle is typically worth 0.25% of final achieved margin, which is why retailers are looking to work with experienced and globally represented suppliers. Until recently, the primary focus of sourcing has been on increasing the mix of direct imported products to enhance margins. Advanced retailers, however, are now concentrating on the next level of costs: cutting spending on buying offices, optimising the mix of source countries and standardising processes and fabrics/materials. "

One of the important facts emerging is that having suppliers close to the retailers they sell to is not the most important feature of a good supplier. What is more important is that the entire process be optimized and void of redundant activities. The successful super supplies must be able to meet a variety of requirements and needs. Mountney says, “Buyers are also juggling the demand from stores to provide frequent deliveries to enable high service, with those of the logistics team looking to reduce costs and the CSR department wanting to see a reduction in carbon footprint. This further adds to the complexity of sourcing. While this situation could provide new opportunities, the task of weighing up all the factors and trying to compare one supply source with another is an even more daunting task these days. Super suppliers, who are in daily contact with a broad range of factories across the globe, will be able to provide valuable insight and remove some of the unknowns to help make better sourcing decisions."

There will be many changes in the way global business is conducted in the future, and it was the recession that provided the impetus for change.