Public Domain Nike Inc.
All industries need raw materials as inputs to their process. This includes labor for some, and parts and components for others. This is an essential function that requires strong buyer and seller relationships.
If there are fewer suppliers or if they have certain strengths and knowledge, then they may wield significant power over the industry.
Some of these may be: Manufacturers are producers of either the entire product or components that feed into the end product manufacturing process.
If the parts supplied are generic and have easily available alternates, the manufacturer will have less power. Conversely, if the manufacturer has important expertise or no competing producers, they will have significant say in the value chain. These types of suppliers purchase products in large quantities from different companies, store these goods and eventually sell to retailers.
These products may be made available at higher prices than if bought directly from the manufacturers, but this allows purchases to be made in smaller quantities than a manufacturer will be willing to supply.
These people manufacture unique items in small quantities and provide them exclusively through representatives or trade shows. These suppliers will purchase from international sources and sell to local retailers.
Managing Suppliers Given the importance of suppliers to the entire value chain, it is in the interest of companies to create and maintain good supplier relations. Some strategies that can be employed to this end include: The first step is to evaluate the cost and the value of the entire supply chain.
This can enable both parties to work together to achieve lower production costs that benefit everyone. Companies need to accept accountability for their end of the process.
This means putting in orders on time and not requiring unnecessary changes later on. There need to be service level agreements and performance evaluation metrics predefined to keep an objective measure of performance.
This will allow clear expectations to be set and followed up on. In addition to penalties, incentives also need to be established to encourage value creation through optimized production and delivery times. Critical information regarding the process needs to be shared with the supplier to ensure that there are no delays or unnecessary costs incurred.
Open communication channels with the required levels of security and confidentiality will help strengthen the relationship with suppliers. There need to be plans in place for exceptional circumstances and emergencies.
If processes are in place then the risk associated with them can be minimized. Contingency plans should be put together to avoid disruption to the value chain.
Natural disasters or other disruptive events can be managed smoothly if all parties know the plan of action. Honesty should be rewarded in cases where an exceptional situation occurs and a warning is issued in time and up front. No penalties should be put on the supplier in these situations.
Meaningful meetings that focus on the critical issues for value chain improvement as well as relationship development can strengthen the buyer seller link. Within the five forces framework, there is an understanding that when suppliers have this bargaining power, they can affect the competitive environment and directly influence profitability for the company.
Factors that Increase Supplier Power Suppliers may have more power: If they are in concentrated numbers compared to buyers. If there are high switching costs associated with a move to another supplier.
If they are able to integrate forward or begin producing the product themselves. If they have specific expertise or technology needed to manufacture goods. If their product is highly differentiated. If there are many buyers and none make up significant portions of sales.
If there are no substitutes available. If there are strong end users who can exert power over the organization in favor of a supplier This can be the case in labor situations.Clothing manufacturers such as Tommy Hilfiger have attempted to enter the sneaker market using their fashion brand to their advantage.
Also, "brown shoe" companies, such as Doc Martens, persuaded many younger buyers to buy hiking-style sneakers instead of the traditional sport sneakers. Product Development support for apparel and caninariojana.com Veritas works with apparel design teams to evaluate product issues and incorporates product testing during the design and development phases of the product life cycle.
About the Summit. The ASI ® Power Summit is the hottest networking event of the year and is your chance to meet with the most powerful players in the promotional products industry. For three days, suppliers and distributors will establish long-lasting relationships, discuss market forecasts, socialize and make important business decisions.
Figure 2 Apparel market share in the US. Bargaining power of Gap Inc. suppliers is low. The company purchases from about suppliers with factories in about 40 countries.
Fox Apparel Inc. It’s rare to find a textile manufacturer that hasn’t moved its production offshore. One exception is Fox Apparel Inc., which is that rare clothing maker whose niche supplier approach has managed to buck the prevailing trends.
Supplier Power. In the fashion retail industry, supplier power is a relatively small and insignificant force. Most apparel companies source their products from third world manufacturers who receive just fractions of the profit.
Suppliers have little control over the fashion industry as, unfortunately, they are dispensable and can always be swapped out.