Too Much Focus on Negotiations


It has come to my attention that too many companies focus on reducing costs in their supply chain by trying to negotiate lower costs with suppliers.  Negotiation will always have a place in supply chain management however when buyers ask their suppliers for lowered costs, they are really attempting to shift costs down the supply chain and not increasing its value.  Supply chain management operation consulting has helped spearhead efforts to increase the value of the supply chain because shifting costs is not the win-win situation most people talk about.

Consultants in supply chain management as well as financial analyst and executives are seeing trends. They more often than not agree that competition in the future will be focused on an efficient supply chain that is nimble and customer focused.

Online retail has grown significantly and is becoming a larger percentage of total sales.  Amazon  ’s logistics has forced retailers to develop strategies to compete. But how is this done?  Its not always a focus on improving shipping. The supply chain needs to match customer’s expectations and provide nimble operations.  This means reducing waste and optimizing business process to see increased value in the supply chain.

Peter Klausz, a senior supply chain management consultant at Operation Consulting Group in New York, NY agrees. “Don’t replace negotiations but focus on every link in the supply chain; Use advanced data analytics and qualitative observations to zero in on improvements”

Negotiations will always have a place in supply chain management however it shouldn’t be the only focus for cost reductions.