Stage 6 Supplier Selection

Before selecting a supplier, the buying center will specify desired supplier attributes (such as product reliability and service reliability) and indicate their relative importance. It will then rate each supplier on these attributes to identify the most attractive one.

At this point, the buyer may attempt to negotiate with preferred suppliers for better prices and terms before making the final selection. Despite moves toward strategic sourcing, partnering, and participation in cross-functional teams, buyers still spend a large chunk of their time haggling over price, which remains a key criterion for sup plier selection.24 Marketers can counter a buyer's request for a lower price in a number of ways. They may be able to show evidence that the "life-cycle cost" of using the product is lower than that of competitors' products. They can also cite the value of the services the buyer now receives, especially where those services are superior to those offered by competitors.

Hewlett-Packard, for example, has worked hard to become a "trusted advisor" to its customers, selling specific solutions to their unique problems. Along the way, HP discovered that some companies want a partner and others simply want a product that works. Still, the company estimates that the trusted-advisor approach has contributed to 60 percent growth of its high-end computer business.25

As part of the supplier selection process, buying centers must decide how many suppliers to use. In the past, many companies preferred a large supplier base to ensure adequate supplies and to obtain price concessions. Out-suppliers would try to get in the door by offering an especially low price.

Increasingly, however, companies are reducing the number of suppliers. Companies such as Ford, Motorola, and AlliedSignal have cut the number of suppliers anywhere from 20 percent to 80 percent. The suppliers who remain are responsible for larger component systems, for achieving continuous quality and performance improvements, and for lowering prices annually by a given percentage.

There is even a trend toward single sourcing, using one supplier. The Knoxville News-Sentinel and the New York Daily News newspapers both rely on a single source for their newsprint. This makes it easier to control newsprint inventories and maintain paper consistency to avoid the time and expense of changing presses for different papers.26

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