Having Problems Managing Suppliers?

Companies across a variety of industries are reporting significant challenges in managing their suppliers, according to a new study from Archstone Consulting (Stamford, Conn., www.archstoneconsulting.com). The study was completed during the first half of 2006 and examined strategic sourcing practices of more than 50 companies across all sectors including financial services, consumer products, energy, manufacturing, retail, and high tech. About half of the respondents' companies were over $1.5 billion in revenues. The study showed consistent trends across all industries.

Supplier relationship challenges identified in the study include:

  • 58% of respondents reported having supplier relationship practices that are inconsistent across the organization, inefficient and overly tactical.
  • 58% of the respondents reported an inability to hold suppliers accountable and ineffective use of incentives and penalties.
  • 49% of respondents reported difficulty with allocation of supplier management resources, often leading to too many vendor managers.
  • 45% of respondents reported misalignment between performance measures and reports and the contractual service level agreements governing supplier relationships.

"Our research shows that while many companies have conducted strategic sourcing and outsourcing to reduce costs, few have mastered supplier relationship management as a critical part of enhancing their supply chain and reducing overall costs," said Ramin Tabibzadeh, a principal with Archstone Consulting and co-author of the study. Archstone Consulting is an independent strategy and operations management consulting firm.

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