Supply chain issues are affecting business all over New Zealand.
Reducing the risk your business is exposed to is the main objective in the current climate, especially with the reduced availability of goods and extended shipping times. In these scenarios businesses often look to increase the number of vendors they deal with to reduce the risk or issues they are experiencing.
This can seem like the best decision for your business, however, if you look to reduce your risk by increasing the number of vendors you engage with, you could be doing the opposite. The costs associated with engaging with a supplier can be more than you are aware of.
Some case studies have reported an average of $5,000 per year to maintain a supplier. These costs can include multiple interaction costs such as phone calls, meeting times and emails to name a few. To process a purchase order, it can cost around $80-150 per order, not to mention logistic costs. These costs can add up quickly when spread across multiple suppliers.
A large multi-site national food processor had a fragmented supply chain that was developed over a number of years based no site driven suppliers.
While this appeared to achieve competitive pricing and top-level service for the business, it ended up reflecting a critical lack of control, transparency and added cost.