Buying advantage: Today’s supplier networks offer more than just reduced prices
The process of vetting suppliers and obtaining competitive pricing is a challenge for all manufacturers. Small to midsize operations, where resources are fewer, especially feel this, and with some turning to supplier networks for help.
Such is the case for The Knapheide Manufacturing Company , a producer of truck bodies based in Quincy, Ill. In March 2003, the company signed on to become a member of Prime Advantage , a Chicago-based supplier network made up of nearly 450 steel and metal-consuming manufacturers averaging approximately $90 million in annual sales, as well as 110 endorsed suppliers.
“We have two to four suppliers per category,” explains Mike McDonald, director of member recruiting at Prime Advantage. “We limit it to keep it fair to the suppliers, but we have more than one so there is competition, and to give our members more than one choice.”
Peggy Magliari, director of materials at Knapheide, claims the obvious benefit of a supplier network is improved pricing. “Also, it puts you in touch with suppliers that have already gone through a qualifying process,” she says. “That streamlines the process. When you are initially looking at new suppliers and you are looking at their background, it takes some time. Dealing with endorsed suppliers that you know other members have used is a huge benefit.”
While pricing benefits are the primary reason many manufacturers opt to work with supplier networks, Magliari says they can offer some key networking opportunities as well. Prime Advantage, for example, hosts two conferences per year during which suppliers and manufacturers have the opportunity to meet face to face. These events also offer educational and resources targeted at procurement.
“We also network among ourselves for different techniques we can use,” Magliari says. “We compare our supplier evaluation processes, and we ask what techniques have proven well for others. That has been huge—being able to network with other members and [tap into] their experiences.”
Magliari says for Knapheide, one of the benefits of using Prime Advantage is that it’s specialized in the Knapheide’s marketplace.
“We felt that this particular supplier network had a good supplier base for industrial—not just a certain industry, but for the industrial market over all different levels of commodities and services,” says Magliari, adding that the regional account managers are familiar with Knapheide’s needs and systems, which facilitates the process of determining whether a particular supplier is a good fit, be it for direct or indirect materials.
Member companies also have access to Prime Advantage’s endorsement process if they wish to vet a potential supplier on their own.
As manufacturers continue to procure and make components on a worldwide basis, Magliari believes supplier networks will focus more energy on adding international suppliers to their rosters.
“One of the trends is global sourcing, and that will [remain] at the forefront on the procurement side,” she says. “Supplier networks will need to ensure they have inroads to the global supply chain.”
McDonald says 80 percent of Prime Advantage’s suppliers are domestic, with the remaining 20 percent located outside of the U.S. That ratio will continue to shift as the company seeks more global alliances—especially for labor-intensive products.
“We are focusing on globalization, and that’s not new—but it’s not going away, either,” says McDonald. “Globalization is becoming more important as a lot of our domestic suppliers are getting into offshore sourcing as well.”