Suppliers can serve as invaluable source of market information
Abbott Labs focuses on SRM during recession
By William Atkinson -- Purchasing, 9/17/2009 2:00:00 AM
One might think that, given the slowdown of the economy and the resulting slowdown in business, this would be a good time for procurement professionals to take a breather. But Susan Kemmer, business manager for Columbus, Ohio-based Abbott Labs, says the exact opposite is true. During a recession, purchasing's role in keeping track of suppliers and global markets is even more vital.
Kemmer is involved in many aspects of supply chain management for Abbott, including the purchase of pharmaceutical ingredients and packaging. She learned a long time ago that it is important for procurement professionals to stay aware of broader economic trends and world events at all times.
"Purchasing professionals certainly need to remain aware of what is going on in individual countries where you are purchasing product, and you especially need to know if there is a problem there," she says. For example, she notes that, if you were purchasing product from western China when a series of worker riots were occurring in June and July, it is unlikely that the products you purchased would make it to port to be shipped.
Suppliers themselves can also be an excellent source of information. While buyers can always ask suppliers some informal questions, they may get better, more accurate, and more detailed information by utilizing a formal process, as Kemmer does. She often drafts a list of 10 or so questions and forwards them to a short list of suppliers. Examples of questions: What do you see the dollar doing vs. the euro? What do you see the dollar doing vs. the Chinese yuan? What do you see freight doing? How many tankers are out there on the water? Is anything being pulled off for any reason? The next time, she will send similar questions to a different group of suppliers.
She provides the questions to the suppliers' sales reps, and they then usually have to go pretty deep into their organizations to get the answers for her. "It may take seven to 10 business days to get the answers," she notes. "They may have to go to their R&D group, their international group, and other groups for the answers."
Kemmer admits that this process forces the sales reps to work pretty hard, but they usually don't mind, because they appreciate the fact that she respects the relationships with the sales rep and the supplier enough to ask their opinion on such topics.
Once she receives answers back, she looks for similarities and differences. If she receives a lot of similar responses to one question, this tells her one thing. However, if she receives very different responses to a certain question, this tells her that she needs to do some further investigating.
While the answers to these questions and the other research that Kemmer conducts provide her with a lot of information related to economic trends in general and shipment trends in specific, it also provides her with information on where things stand, or should stand, with pricing. Given the slower economy, it stands to reason that prices of commodities and other products should be coming down, as demand is reduced.
However, Kemmer has found, most suppliers aren't going to voluntarily reduce prices. "You need to be 'politely aggressive,'" she suggests. She keeps digging and looking to make sure that all potential savings are passed onto her organization.
Of course, all suppliers know that they have to keep competition in mind, and Kemmer stays abreast of all the suppliers she can contact for product. The number of suppliers for each commodity or item depends on what the specific commodity or item is, though. "In some instances, it is good to make sure we have a lot of people fighting over the business," she explains. "In other instances, we want the dollar value that goes with the volume of business." In sum, she emphasizes, you have to know the market with everything you're buying, if you want to be making the best decisions for your organization.
Throughout the process, Kemmer is always very open and honest with suppliers, in terms of where they stand with her company. "If things are going their way, I will let them know," she states. "If they are not going their way, I will also be honest with them about that." This gives the suppliers a chance to make some changes. "In most cases, I have found that, when I am honest with them, they will work very closely with me."
Know your suppliers other customers
06/05/2009Suppliers join the design huddle
09/06/2006
Now Playing: 