Are you too dependent on key suppliers?
July 28, 2010 by Jared BilskiPosted in: Benchmarking, Communication tips, Efficiency, In this week's e-newsletter, Latest news & views, Procurement and purchasing
It makes sense to give your best suppliers a good chunk of your business. But if you rely too heavily on a small number of suppliers, you can really paint yourself into a corner.
Many of peers appear to be doing just that. A new benchmark report from CAPS Research revealed some troubling findings about supplier dependency.
Here’s what the report discovered:
- Only 18% of companies have a formal policy that limits how much business they can give to one supplier, and
- Less than 50% of companies track supplier dependency.
To avoid becoming too dependent on a single supplier, experts suggest that companies draft a policy which limits the amount of business you can give one supplier to around 35%.
Readers, does your company have a limit on how much business you can give a single supplier?
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Tags: Benchmark report, CAPS Research, Formal policy, Supplier dependency, Suppliers
August 5th, 2010 at 4:26 pm
I never really thought about it until now, but we are dependent on one supplier for almost all of our irrigation needs. If we would shop around, we could get lower prices somewhere else that would save us money. Also, when we get in a money crunch, that hurts us, too, with this supplier.
August 17th, 2010 at 10:08 am
I was alway an advocate of not being supplier dependent. My philosophy to shop the best price. Of course there are situations when this flexibility is limited for example when design requires specific processes and capital equipment specific to producing the final result. It would not make sense to invest in multiple capital purchase which is the case in order to have more than one vendor. We actually did invest in multiple molds recently just incase our currently vendor for some reason was unable to supply a critical item that represented more than 50% percent of our revenue.