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Sourcing’s Missing Link - Alignment with Customer Requirements |
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If you’re involved in sourcing, when was the last time you started a sourcing event with a list of customer requirements, or your company’s go-to-market strategy? Wal-Mart is considered best of breed in sourcing and supply chain as is Dell but what really makes these corporations superior is alignment with customer requirements and their go-to-market strategy.
WalMart’s customers don’t have time to shop around for the best price. They want to go to one place and get all of their families’ needs filled with the smallest involvement in time and transportation costs. At the same time, they want great prices and a good, but not necessarily wide selection of the same types of products. They don’t need 15 different brands of olive oil. Wal-Mart committed to delivering “Low Everyday Prices” and, from a market basket approach, the customer at Wal-Mart is pretty certain trip after trip that their shopping cart is costing them less than it would at any other competitor. Wal-Mart in turn promised huge regular volumes to suppliers, but demanded the lowest prices possible and strict adherence to supply chain standards in order to drive transactional costs out of the price to the consumer.
Dell, on the other hand, knew that, although many aspects of a personal computer have been standardized, many consumers wanted to customize their “personal” computer. The consumer was willing to forgo the impulse buy at the local retailer in order to get a better price with a customer configuration. Dell then sourced suppliers that could deliver the lowest prices combined with high quality, but in a build-to-order model. Inventory increases costs, and therefore the prices that Dell would have to charge, so suppliers were encouraged to build factories, warehouses or assembly lines within close proximity to Dell production facilities. In exchange for these commitments by suppliers, Dell sourced for suppliers as true partners and not just the lowest cost producer at the moment.
Aligning your sourcing requirements with your customers needs will not only reduce costs and improve margins, but allow you to dominate your competitors.
Good Sourcing!
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