How can we deal with a monopoly supplier and maintain a sustainable business.

Dealing with monopoly suppliers always a herculean task, they often increase the price, high delivery lead time, etc....

Most of the time you will end up delay in delivery and also decrease the profit of the business, we had faced these issues several times, let's check how we tackled.

Our Aim to make our customers happy and supply the product with competitive price, due to the above issue we were unable to manage the same, we had decided to make a sustainable formula in order to move forward and make our customer happy. We had analyzed the problem identified following issues:

• There is no proper forecasting for the product required, so let us analyze the past trend (3 years) forecast accordingly
• Lead time is very high in suppliers side for production (8 Weeks) which has to be reduced at the bare minimum level same has to be taken up with higher management (Suppliers).
• If we start ordering based on the forecast we may end up with higher NPA, so we have to order only fastest moving models.
• We need to work out the alternative of this product (though it is a monopoly), the similar product needs to be identified and try to convince the customer who required the product immediately.

Believe me, by implementing these we manage to fulfill the requirement of our customers almost 90%, Implemented solutions:

• We had analyzed the ordering trend and sale trend and accordingly we ordered fast moving goods for 3 months and started reviewing the trend of every month.

• Production lead time issue had been taken up with supplier higher management and they had agreed to reduce the lead time from 8 weeks to 6 Weeks provided that we have to sign a contract where our obligation to make sure minimum number units has to procured from supplier / Year, and by agreeing this supplier had agreed 5% discount on each unit.

• Now we saved 5% of product cost and lead time also reduced but we found some more areas for improvement.

• External lead time has been reduced but what about internal lead time? normally it will take 1 week to sent a PO to the supplier, now it has to reduced to one day how we can do this, we had discussed with all relevant department heads and made them understood the issue, they had decided PO will not be kept unsigned in their table more than 30 mins, in case of any discrepancy it has to clear immediately otherwise it will move to next level, finally we achieved this as well. now we saved almost 3 weeks delivery time.

Still some areas for improvement?

Yes, it is transit time, we had decided will rely on only fastest transit time and reliable shipping line (Within the budget) service, which again makes another 4 to 5 Days saving, and make sure immediate clearance so now our customer happy & sales happy.

But how long this can sustain? we have to expect the unexpected.

We started to find the alternative product in market finally we found somebody who can make a similar product and explained them about our product which we required and they manage to build the similar product with similar performance, and it had been tested in our labs and approved as well, also we had given some pilot order to the supplier, We started supplying this product to our customers who required the material immediately. 

Finally, we achieved the target, by implementing this and we made our customer happy and also our sales volumes increased.

"A customer is the most important visitor on our premises, he is not dependent on us. We are dependent on him. He is not an interruption in our work. He is the purpose of it. He is not an outsider in our business. He is part of it. We are not doing him a favor by serving him. He is doing us a favor by giving us an opportunity to do so."Mahatma Gandhi