What Supply Managers can do When Dealing with Limited Supply

By: Dan Plute

Invite suppliers to be involved - Good relationships with suppliers may induce suppliers or distributors to work harder to accommodate your organization's needs.

Work aggressively to find other sources - It is possible that if you introduce competition, the suppliers may feel more competitive and therefore it may be more likely to lower their prices or agree to better terms and conditions.

Work with other similar organizations - Perhaps another organization can offer ideas that one supply manager has not considered in the past.

Look for ways to be a more attractive customer - Being a more attractive customer might encourage the supplier to work more cooperatively with a supply manager's organization.

Skills Required of Supply Managers for Dealing with Few Suppliers

In addition to the many actions possible for dealing with a limited supply base, there are also many skills that a supply manager must possess to effectively handle supply issues when working with few suppliers. Supply managers who are adept at these skills are able to obtain supply in the best possible way for their organizations.
Successful supply managers in the transportation sector who deal with limited supply bases are:

Knowledgeable. Torres and Fulk agree that knowing suppliers, knowing the products, and continually learning and acquiring knowledge are key to ensuring the best possible purchases. Torres notes, "Manufacturers and distributors have the upper hand when they know more than you do." For example, some suppliers may not be forthcoming with information about who their sources or suppliers are, so it's up to the supply manager to do his or her homework.

Skilled negotiators. As Fulk indicates, "When you only have one source, you really have to negotiate with them." Sometimes, the supply manager can guarantee to the supplier that the organization will buy from the supplier at least "X" number of items or with a certain amount of frequency. Knowing this, the supplier might be willing to negotiate a price break.

Persistent. This applies to being aggressive about looking for new or alternate sources, as well as when communicating with suppliers. Fulk explains that persistence in communicating the need for a particular item may help the supplier meet your delivery schedules – despite the uncertainty associated with long leadtimes.

Proactive about supplier development. This skill goes hand-in-hand with being knowledgeable about suppliers and products. Could a supplier for one part be encouraged to carry another part that is needed? Fulk suggests explaining why it would be beneficial for both the buying and the selling organization if that supplier began carrying a certain line of products or even just one item. For a public entity, Torres notes that it's very important to encourage competition by contacting distributors and other suppliers to see if they could get the item – even if it's from another manufacturer.

Knowledgeable about inventory. Supply managers must be aware of current inventory available to be able to account for long leadtimes due to a lack of manufacturers for certain commodities. The goal is to have enough inventory to get the organization through lengthy leadtimes, but not so much that the funds and cash flow are tied up. In these cases, it's also important to have good working relationships in place with the planners and inventory management staff of the organization. When everyone is working together constantly reviewing and analyzing the material needs, it's easier to achieve the best possible inventory flow.

A diplomat and a supplier manager. Being diplomatic, following good supply management principles, and keeping suppliers competitive can be a tenuous balancing act. A supply manager can really benefit from having good relationships with suppliers – suppliers might be willing to accommodate your organization sooner than other organizations if there is a good rapport between the supplier and the buying organization. However, competition is still important – particularly in the public arena with bid requirements – for obtaining the best price and service possible. Torres strikes a balance by reassuring suppliers that lose out on bids that they will be contacted again for other products and services, and at the same time making the chosen supplier aware that while a good working relationship should exist, the supplier will constantly be monitored to ensure compliance with the scope of the bid.

Aware of the demands for products and services. This is especially important to supply managers in the transportation sector whose demand for commodities and parts may vary – even according to the season. Supply managers for transits, for example, must be prepared for the demand for air conditioning compressors in the summertime and for heating equipment in the wintertime.

The catch-22 situation of maintaining competitive business practices with a limited supplier base can be challenging. It's a situation with no easy, right or wrong answers. Each situation must be handled case by case – accounting for factors unique to a supply manager's organization and its suppliers – thus, it becomes difficult to provide a 1-2-3 formula for dealing with these situations. However, returning to and relying upon sound supply management practices will give supply managers an edge in these difficult situations. In those instances where a supply manager is procuring a product (such as a wheelchair lift for a bus) or a service from a limited supply base, the situation may be challenging, but for many supply managers, the difficulty and challenge are what make their jobs exciting and rewarding.

Copyright © 2009

Article Source: http://www.myhotarticles.com

Procurement Services Associates has specialized in procurement management, Contract Administration and Supply Chain resource allocation since 1988. We provide entry to senior manager level professionals for direct hire and project support roles.

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