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LED Lighting Buy: Excessive Squeezing Suppliers Is In "self-mutilation"

May 07, 2015

Soon, a LED lighting company elevates one buyer to supply chain managers. Not long after, he heard the Manager broadcast it, he will transfer some parts from a supplier to another, what reduces the price range, how much they can save on purchasing costs each year. He is also prepared to adjust the whole supplier base will reduce purchasing costs. A new broom sweeps clean three fires, nothing really worthy of criticism, but its ways and means are debatable.

First of all take a look at the Manager's price method: he picked that have the largest amount of components and conduct another inquiry, this method will certainly get a good price. But he forgot, the original supplier has plenty of other parts of the company, the amount is very low but still at a high dosage levels, there is no doubt that vendors at a loss, can only rely on those large amount of parts to repair the damage.

Direct result of adjustments is the supplier's overall earnings fell sharply, the company became unprofitable or less profitable customers and shift its focus to other, more profitable customers, leading suppliers to the company's on-time delivery rates, quality and service levels reduce sharply. Before the new Manager came in, all suppliers quarters of on-time delivery rate is above 96%; a few months after taking office, there are several suppliers of on-time delivery rate has fallen below the 90%.

Secondly, there is a vendor to lose trust in the company. Supply chain manager, formerly in charge of chassis manufacturers took this piece of business found that several major suppliers in loss-making State: on the one hand due to the overall economic downturn and partly because crude prices over the years. Result, the supplier is not financially, have no incentive to burden the technical strength, because the development of new parts is likely in the next round of inquiry into competitors and which directly affect the company's development of new products.