strategicinsight
BY JAMES A. COOKE, EDITOR AT LARGE
But can they deliver?
Conventional wisdom says
buyers look mainly at price when
they go to choose suppliers.
Yet many place heavy
emphasis on delivery
capabilities as well.
WHEN IT COMES TO SOURCING
products, parts, or materials, some
companies choose their suppliers
strictly on one basis: price. Given
the current flat economy, that’s
probably no surprise. These
companies are likely under
enormous pressure to hold
down supply chain operating expenses, and that
starts with procurement.
But for many other buyers, price
is not the sole concern. “I would say in
most cases, cost is a very important consideration, but it’s not the only consideration in picking suppliers,” says Kumar
Venkataraman, a consultant with the firm
A. T. Kearney.
As for what other factors might come into
play, that varies all over the map. Sometimes,
logistics capabilities—that is, its ability to get
the product into the hands of the buyer at the
agreed-upon time.
“Where you don’t have buffer inventory, deliv-
ery is important,” says Simon Ellis, a practice
director for global supply chain strategies at the
firm IDC Manufacturing Insights. “If being late
with a delivery causes the downstream process to
completely stop, then evaluation of the supplier
on this basis [takes on enormous impor-
tance].” In those cases, delivery capabilities
will rank right up there with price in deter-
mining which supplier gets the contract.
The extent to which logistics factors into
the supplier selection decision has a lot to
do with the buyer’s type of business.
Among consumer goods manufacturers,
where it’s common practice for customers to
take control of their shipments at the seller’s
