Most buyers would split savings evenly with vendors

15 September 2009

16 September 2009

The majority of purchasers (73 per cent) would give half their savings to suppliers who submit successful cost-cutting ideas, according to a survey of 100 buyers polled by Supply Management.

Most thought sharing cost savings across the whole life of a product or service was fundamental as an incentive for vendors to continually deliver best value, while many reported having implemented such initiatives already.

A number said relations with suppliers had benefited from sharing the savings achieved through their own cost-cutting proposals.

Some suggested that while offering a percentage of savings to innovative suppliers is good practice, half is excessive. Others said splitting savings over the life of the product or service is untenable, instead going halves for the first year only.

Of the 27 per cent who would not share cost savings with suppliers, a number suggested alternatives as a means of securing good supplier relations, such as increased levels of business and security of tenure.

Last week, General Motors announced it was to split cost savings evenly with vendors who submitted successful ideas on cutting the costs of car parts. According to industry experts, the move is predicted to transform strained supplier relations.

SMsep2009

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