What do you do if your supplier sourcing costs are too high?

1.Negotiation: Initiate discussions with the supplier to negotiate for better pricing or terms. Highlighting the requirements and ask if there are any opportunities for cost reduction or discounts. 2.Market Conditions: Consider Market conditions, such as fluctuations in raw material prices or economic factors, which may impact supplier pricing. 3. Dual Sourcing: Explore other suppliers who may offer competitive pricing or better value for your needs. This can involve reaching out to different vendors or conducting a new round of sourcing. 5. Cost Analysis: Conduct a detailed cost analysis to understand the breakdown of expenses and identify areas where costs can be optimized.

It's time to start benchmarking your primary spend categories and your competitors. Purchase like products from a competitor, tear them down, and try to identify the brand/type. Once you have an idea of what your competitors are doing, it will provide a basis of your product costs for comparison.

If supplier sourcing costs are too high below measures helps: i)Firstly reevaluate your Cost model: You may be working on a Selling Price model Make Paradigm shift to Total Cost of Ownership (TCO) To achieve this, analyze all the individual costs throught the entire Supply Chain Life Cycle Management i.e. from cradle to grave, in terms of direct Material / direct Labor costs, any Indirect Material / Indirect Labor costs, Overheads, Margin, Sunk costs (if any) and proceed with Cost Buildup to arrive at the right Price ii)Reevaluate Procurement strategy: a)Treat your suppliers as Partners in Progress and establish transparent Supply Chain b)trade-offs between Single supplier and multi suppliers c)Consider empaneling new suppliers on demand

If the supplier sourcing cost is too high, I would explore alternative suppliers, negotiate better terms, streamline processes, or consider in-house production to reduce costs effectively and maintain competitiveness.

This is a common scenario in LATAM. For this reason, we constantly handle contract management and maintain our attention on the market analysis stage of strategic sourcing. In order to share ideas, I also make an effort to keep in touch with my coworkers at different companies.

It is should genuinely gap of demand vs Supply. If the product is monopoly / very few suppliers for them such scenarios often prevails. Promote long term partner ship possibly keeping in mind the re- valuation on assured volume should help.

To address high supplier sourcing costs: Audit Spending: Review current expenditures and identify areas for cost reduction. Renegotiate Contracts: Negotiate better terms with existing suppliers or contracts. Explore Alternatives: Seek out new suppliers and compare pricing, considering total cost of ownership. Group Purchasing: Partner with other businesses to leverage bulk buying. Streamline Processes: Use technology to automate procurement, minimizing manual work and errors. Local Suppliers: Source locally to reduce transportation and tariff costs. Supplier Collaboration: Work closely with suppliers to find mutual cost-saving opportunities.

Consolidate spending: If you're buying from multiple suppliers for the same good or service, try to consolidate your business with one or two suppliers. This can give you more leverage when negotiating prices.

Concessions, payment terms, one time off, volume ladders, press releases. These are a few possible alternatives for though negotiations where costs are tight. Surely one of these will help to achieve a successful and sustainable result.

Inventory management: Holding onto too much inventory can tie up your cash flow and increase storage costs. Implement strategies to optimize your inventory levels.

It is vital to derive the strategy based on 2X2 metric analysis, Low Cost-High Value: Good to Go High Cost-High Value: define long term strategy by understanding the cost enablers and plan to optimize the cost. High Cost-Low Value: No Go Low Cost-Low Value: No Go

Additionally to the obvious which is finding cheaper alternatives to not just the supplier prices, but to every step of the sourcing process, the most important part in my opinion is relationship building and nurturing. The most costly part of the sourcing process is constant movement and change of suppliers. The more you’re able to build strong supplier relationships the more you’ll be able to speed up and streamline your processes. With less friction comes less engaged ressources and hence more cost control.

If supplier sourcing costs are too high evaluate where the costs are deriving from. Too many audits perhaps, so evaluate if you could implement virtual audits or questionares instead; based on their performance history of course. If there is an opportunity to reduce excessive packaging by reevaluating your product requirements without affecting its performance, safety or regulations then investigate over consumption of labels, boxes, wrappers, etc. If you can get the same quality, see if you could source locally to bring down costs.

Do Value Engineering. Buy only what you need and not what you want. You may be paying for over the specifications you need in terms of materials, tolerances and others.