Save on Costs by using a single source supplier.

Managing the supply chain is essentially a strategy which can be employed to cut administration costs and pass on various purchasing responsibilities to a main supplier. This method has been dubbed ‘Supplier Clustering’ and is used extensively in the automotive industry.

‘Supplier Clustering’ how does it work ?

The purchasing department of your manufacturing company chooses a main supplier in an area of supply. This supplier is then responsible for the procurement of your needs in that area ie Manufacture, delivery and quality of components – this eliminates small direct suppliers.

A company’s supply chain can contribute up to 40% of the trading price of a product in terms of: purchasing costs, transport, invoicing and stock control – it makes sense to reduce the number of supplier contacts.

Buyers also have an increasing need to reduce costs and guarantee supply to become process improvers. Often, there is an imbalance between understanding of complex manufacturing processes and the greater knowledge possessed by suppliers. The supplier elected should bridge the knowledge gap and reduce costs by refining the process through which a component is produced and delivered – without using the company’s resources.

Contribution of Suplly Chain Costs to full trading price of a product