Tendency shows, that the competition in global markets is continuously rising. Additionally, the price sensitivity of customers becomes higher as well, as Asian competitors are rapidly gaining more and more market share.
Therefore, being successful in today’s industrial environment needs more than just tough price negotiations. Profitability highly depends on efficient business models, optimized processes and stable, reliable suppliers, who are willing to add more value to their products and services.
Hence, the relationship between you and your suppliers is critical for being competitive in the long-term. This is why reviewing and checking up on your supplier base is so important, while looking out for new potential partners.
However, most companies use different KPI’s to get a bigger picture of the quality of the suppliers. But these KPI’s often narrow down the suppliers’ work in a way, which causes the added value to get lost between the numbers.
But in reality, this added value can cut up to 20-40% of your costs.
This article names the most common ways your suppliers can help you make better profits and helps you how to determine, whether your current suppliers are the right ones in the long-run.
How suppliers can cut your costs
How can suppliers, such as ELA Solutions, cut your production and development costs? Truthfully, even peers, who are long-term industry gurus, are likely to miss specific cost factors of a product, which can be reduced. Your supplier should always be an adviser, who makes you aware of what can be optimized and how.
- Reducing the complexity of a product
Often we get drawings or prototypes from our customers, that they want us to produce. In each and every case we ask ourselves if there is a way to optimize the product and cut costs. Therefore, we gather more information on the context of the product: Where is it used and how? What requirements should be fulfilled? Is it a visible or non-visible part? What are the special needs of our clients?
In 6 out of 10 cases there is at least 1 cost factor that can be eliminated.
Our team is highly-focused on getting the best results out of a project: reducing costs while maintaining an appealing design.
- Redesigning a product
Sometimes it is not enough to eliminate or change specific parameters, the product itself has to be rethought and built from scratch. A supplier, who is focused on their own profits, will most likely not add to their workload by redesigning a product without the customer asking or even paying for it.
When redesigning a product, we are able to cut costs by:
- using alternative raw materials
- choosing more cost-efficient technologies
- eliminating or merging parts and features
- Offering free prototypes
Getting new customers and projects on board is crucial for your business’ success. And almost all big fishes demand prototypes before even talking about the price. Producing prototypes is one of the most “annoying” things for a lot of companies, but why? Often because of the costs involved and the lack of expertise, production efficiency and capacity.
26 years of continuous development and experience have taught us, that delivering high-quality prototypes in few days can make the real difference to our customers. It makes their life easier as they are able to present these prototypes to their customers first.
- Technology, production procedures and raw materials are continuously evolving, but in many cases we see customers who are strictly sticking to their initial product design and technology, although it might be outdated. Often this is related to either lack of expertise or over-specialization of the company or division itself.
Therefore having a supplier, who is highly experienced and trained in industrial technology, innovation and standards, can be a key-successor in the short and long-run as well.
- Minimizing waste generation
Lean Management is a wonderful approach to managing an organization, but what we see in our business’ environment, is that it is barely used in SME’s.
But the truth is, that producing the “Lean-way” means more innovation and lower costs. What about all those waste parts, damaged tools, hours of quality tests? Those are all included in the price.
This said, your supplier can cut your costs by operating more efficiently. Question is, whether your suppliers share this attitude and are willing to improve their performance continuously.
Now you know how a supplier can contribute much more to your business’ success, than simply keeping the initial price. But often suppliers would rather increase their margin, than focus on delivering the most cost-efficient solution to their customers.
So what are the indicators, that prove your partner is on the win-win side?
Courtesy and Helpfulness
A supplier who is always making recommendations and suggestions without you even asking for it explicitly, is definitely focused on your satisfaction.
Expertise and Experience
Being helpful is very important, but without any deeper knowledge and experience on technology and product design, your supplier will never make it to that level.
Trust and Transparency
We believe that a fruitful long-term business relationship is only possible by playing with open cards. The production of a part is an exciting challenge with one possible result: a high-quality product and a customer-supplier win-win. The best way to build trust is to maintain a personal customer relationship. This means inviting your customer and introducing your company and production.
Long-term business success in the industrial production industry not only depends on sales, but is also a matter of efficient operations and optimized supply-chains.
As a leader, you should focus on working together with suppliers, who have the same customer-oriented attitude as you have towards your customers.
The customer-supplier relationship should be based on mutual trust and cooperation.
We believe that transparency and know-how build the foundation to a fruitful, long-term business relationship.