Strengthening Supplier Relationships Versus Traditional Cost Containment

Supplier relationships are frequently damaged as a result of procurement cost-cutting activities during an economic downturn when it should be the ideal time to strengthen key supplier relationships for long-term success. — By Lena Haram

Cost management is one of the areas of focus for procurement, and some believe it is the most important. This is true especially during normal economic downturns. Often during times of economic stress, cost minimization becomes the over-riding goal at the sake of strategic processes, like supplier relationship management (SRM).

In an economic downturn, the concentration on reducing costs comes with a hefty price: Loss of the full value that SRM offers. When the economy is contracting, SRM is in danger of becoming a cost control process instead of a supply chain system that delivers full value.

Allowing SRM to devolve into a cost control process means the business loses what it needs most – the ability t...

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