MANDATORY COMPETITIVE PRICES
In the past (and especially in countries like Germany), there were suppliers offering excellent quality and service, but with high serial prices later on, far off from market prices.
This model worked well during decades because it was accepted by customers, considering that gap in prices as an extra fee for the excellent service and technology advantage brought by those suppliers.
On the other hand, the extra price allowed the suppliers to invest in further resources to be more and more “premium”, but at same time more expensive due to the higher overhead.
From my point of view this model will not work anymore because cost pressure in the markets is so massive that high prices will not be accepted anymore by customers.
With this I don’t mean that innovative suppliers will not be needed. In fact, they will be needed even more than before. But their talent, and there is lot of it, has to be driven in a different way.
1/ The first step is to stop being arrogant thinking that EU producers are the best (the fact is that we are not the best if customers chose others), and to accept that we have a problem ahead because we have lost the path of being competitive already in several markets. In fact, this will be the case with other markets if no changes are made.
2/ Once this is accepted, the second step is to work together, suppliers and customers, to get back to a competitive price level which allow EU producers to compete once more against products from Asia.
And how to compete having higher energy costs, higher raw material costs and higher labor costs?
Working together to be simply better by using the available talent and know-how, not to be “premium” but to be competitive: lean structures, excellence in efficiency, productivity and innovation. And not just in technical areas, but in all the areas of the company.
To make it a reality, purchasing will pay a crucial role in interaction between supplier and customer, with transparency of cost & processes, specialization of suppliers and optimization as the key points.
If you are interested in investing in an exceptional team and increasing your company’s profitability, we encourage you to consider our next training focused on improving strategic purchasing skills. Additionally, please feel free to contact us for more information.
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