The practice that we all know is leveraging all volume and suppliers. Despite understanding the idea, it is not comprehensively applied. All too often we are unable to put the volume of all business units on the table before a supplier. The information has two dimensions - all the purchases of a particular material and all the purchases we make from a supplier (across commodities.) Lack of information has been the major inhibitor in the past. Today with data warehouses and networking this barrier has been dramatically reduced.

The power of leveraging is enormous. The first benefit is lower unit price. For most materials and services greater volume translates into lower prices. The second benefit is lower transaction costs. Fewer suppliers reduces communications and administrative efforts. Third, more volume with suppliers increases service levels and attention when problems occur.

Best Practice | Case Study | Commentary

April 5, 2000
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