Welcome to the May 2010 Issue of The Cutting Edge

Research has proven that maintaining good relationships with suppliers has a direct affect on companies in terms of growth and profitability. The articles in this issue deal with how you and your suppliers can better work together to achieve higher profits and success. The total quality management principle of target costing is discussed as well as tips and advice for creating the most beneficial relationships.

In addition, our winner from March’s Bad Customer Service Contest is featured with her story of customer service at its worst.

Finally, keep an eye out for our upcoming June Issue where we will be announcing open times and pricing for our new Zeiss Contura G2 CMM!

The Importance of Setting Target Prices for Your Suppliers

Target costing has been used in Japan since the early 60s, but didn’t start gaining momentum in the US until the 90s. Around 90% of Japanese firms use this cost-saving strategy while only 50% of US firms are taking advantage of its benefits. Given that external purchases average approximately 60% of cost of sales for most manufacturers, it would seem that target costing should be given a great deal of attention by management.

Target costing is the process of determining a target price for your suppliers in order to receive the most competitive quotes. Giving suppliers a target price ensures understanding of the processes used and saves valuable time and money for both parties. In using target costing, supplier relationships are greatly improved by providing an avenue for earlier supplier involvement, clarifying true cost goals, and supporting supplier alliances.

By involving suppliers earlier in the process, all possible ideas for cost reduction can be considered, rather than later in the process when extensive resources have already been invested. This early involvement of suppliers is critical, given the rule of thumb that approximately 70% of the product’s cost is determined by decisions made during the design process.

When using target costing, the entire supply chain is seen as an integrated whole. Each element refines its operations to reduce its own costs, and therefore, reduces the total overall cost of the final product. In addition, target costing assists in internal improvements by creating a benchmark for cost performance, supporting team involvement, and creating greater cost accountability internally and with suppliers.

5 Tips for Supplier Relationship Management

The approach that your company uses to interact with and manage suppliers will directly affect the quality of products, competitiveness of your company, and ultimately your growth and profitability. Maintaining good relationships with quality suppliers is essential to the health and growth of every company since you can only be as strong as your weakest link. Reliable and trustworthy suppliers will ensure that your supply chain is strong and meets the expectations of customers and management alike. The following tips describe the ways in which suppliers affect your company and how to make those effects positive.

Learn the 5 Tips for Supplier Relationship Management

Online Supplier Profiles: The Benefits to Your Company and Supplier  

Ninety-five percent of buyers lack complete information regarding their potential supplier. This information is critical in today’s competitive manufacturing environment. Placing a supplier profile registry form onto your company’s website gives you a competitive advantage over others within the industry. This allows new suppliers to easily register a supplier profile, thus increasing the number of supply options available and decreasing the time required to find available supply options, which ultimately reduces cost.

Read the complete article

Bad Customer Service Contest Winner

We would like to thank everyone for their submissions to our “Bad Customer Service” contest. We have chosen Ms. Sandy Waggoner’s entry as our contest winner! Sandy is the President of Resource Solutions Associates in Milan, Ohio. Her story, although quite hilarious, truly depicts customer service at its worst.

Read Ms. Waggoner's story

Whirlpool, Boeing, Olympus Among Many Adopting Target Costing To Save Money

Honda and Ford Show That Supplier Relationships Pay Off

Newegg Axes Supplier Over Fake Intel Chips   

Supplier Relationship Management Conference – June 3-4 2010

Wolverine Machine Releases New Miyano LZ-01R Brochure (PDF)

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We hope that you enjoyed this issue of The Cutting Edge and can use these quality principles within your organization. If you would like to learn more about Wolverine Machine Products, you can visit our website at www.wolverinemachine.com or call directly at 800-397-8446. We look forward to doing business with you!