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Fueled
by tax cuts and declining interest rates, the
economy grew 6.1% during the first three months of
2002. But corporate business scandals, slipping
stocks, and the devalued dollar set the stage for
a no-growth recovery. If you're waiting for an
upturn before implementing changes to your
procurement strategy, you may find that you have
waited too long.
When the market recovers, people will become more
tactical and less strategic. Resources will be
stretched and limited. While the market is in
transition, companies should look at their
business practices and make adjustments -- prepare
in a downcycle and expand in an upcycle.
Historical technology cycles during the past 20
years have been fairly predictable. About every
five years the market goes through a boom/bust
cycle.
What changed with the past cycle besides the
devastating highs and lows the industry endured?
Independent distributors have earned a place in
the supply chain. It is no longer sufficient to
feed a forecast to your supply base and
manufacturers and then expect a seamless
production process without disruptions as you try
to make critical last-minute buys through unknown
brokers to keep production lines up and running.
This model is costly and inefficient.
If you have not already done so, consider
partnering with a qualified independent
distributor that can help you make proactive
rather than reactive decisions. Find an
independent distributor and make them your
business partner.
Using the correct independent distributors can
provide access to the spot market, while
minimizing your risks. The spot market provides
real-time pricing that can help your company lower
component costs. An independent distributor
also will provide you with market intelligence and
increase visibility throughout the supply chain to
enable you to head off unscheduled supply
disruptions. Partnering with an independent
distributor that has strategic buy and sell
relationships with other OEMs will connect you as
a link in the supply chain that is invisible to
may customers.
This link will give companies liquidity to balance
inventory better. As the industry continues to
reduce inventory levels, fab closures and
manufacturing cutbacks at supplier facilities will
eventually
increase lead times on many commodities as
business improves. Expect to see old, used, and
counterfeit products in the supply chain to fill
gaps during the next several years. By having a
relationship with an independent that has invested
in a comprehensive ISO quality control system, you
will minimize risks and protect your company. With
companies downsizing in the past year, independent
distributors become a variable-cost solution.
Their international procurement and
global reach into the spot market can be an
extension of your own procurement department.
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