The nature of what a ‘company’ is has changed dramatically. 25 years ago what was a labor cost is now a supplier invoice.
Our study shows that 70% of the average company's revenue is now spent with third parties, compared to only 12.5% spent on labor costs. In short, supplier relationships help define the modern company. And smarter management of the cost base can significantly improve business performance.
As our study suggests, management that neglects the strategic aspects of their supplier base, or fails to maximize its value, risks missing out on developing competitive advantage and delivering long term shareholder value.
Businesses around the world have been on a journey, whether deliberate or not, of cost externalization. The majority of any business’ revenues are now spent outside the organization. What was once a pay slip, is now a supplier invoice.
The larger role that suppliers play has turned organizations into a complex network of stakeholders and suppliers. However, the truth is that management practice has not kept pace with this externalization of cost. And the implications of this go to the heart of business and operational management.
Aligning these thousands of suppliers, your internal stakeholders and the resulting the cost base with corporate aims can improve business performance significantly, in terms of profitability, productivity, risk management, innovation and intellectual property.
Management that neglects the strategic aspects of their supplier base, or fails to maximize its value, risks missing out on developing competitive advantage and significant source of long term shareholder value.
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