What Is a Vendor Lock-In?

Supplier control refers to the process by which an enterprise evaluates and receives suppliers' raw materials and supporting services. [1]

Supplier control

Right!

Supplier control refers to the company's

The continuous development of enterprises requires cooperation and alliances between enterprises, but the companies in each node of the supply chain still have more or less conflicts of interest. Here, how to control and motivate suppliers is mainly proposed from the perspective of the demand side. ^[1]

In order for the goods provided by the supplier to continuously meet the requirements of the purchaser, the purchaser shall adopt the following effective control methods according to the actual situation. ^[2]

--Cost Control

Cost control is an important part of the control of the entire chain of business operations. In a broad sense, cost control is the control of all costs in all aspects and links of chain enterprise operations. Here we introduce a series of cost control related to the supplier related to procurement, that is, the narrow range of cost control. ^[3]

Throughout the world's well-known chain companies, we can find that really large-scale, very stable and growing companies often control their costs by using advanced management methods to achieve more profits. Walmart, the world's largest retailer, has provided conditions for its development and leapfrogging to become the world's largest chain company because of its effectiveness in cost control. So, what effect can the control of the supplier bring to the chain enterprise in terms of cost control?

Achieve price control

We know that prices are mainly determined by the relationship between supply and demand in the market. In addition, negotiations between supply and demand sides can also play a role that cannot be ignored. From the current market situation, the price of goods is often the focus of negotiations between buyers and suppliers. For suppliers, the price of goods is directly related to their sales and profits. Therefore, although under certain pressure or temptation, the supplier will make certain concessions in the price to the extent it can bear, but its premise is to ensure that the supplier is profitable. On the other hand, the commodity price directly means its cost to the chain enterprise. In order to obtain higher profits, the chain enterprise will work hard to reduce the cost of all aspects. Therefore, it should be controlled by some means control.

2. Guarantee the quality of goods

Product quality is the life of a chain enterprise. In today's increasingly fierce competition, despite the increasing number of factors affecting the success or failure of chain companies, quality is still the key to the company's success. The quality competition between chain enterprises is very fierce. It is not only manifested in the sales of goods, but the quality itself and the way of management also directly affect the competitiveness of the chain enterprises. Therefore, the quality competition among chain enterprises is actually the competition of quality management, and various industries at home and abroad regard quality management as an important task of chain enterprise management.

The current chain enterprises attach great importance to the internal control of product quality, and have adopted various quality management methods within the enterprise, including statistics, and the establishment of a quality management system. But these tasks often cost a lot of money. If the external supplier of the chain enterprise can be controlled, and then the internal product quality control is strengthened, then the chain enterprise can obtain greater cost savings from it.

In fact, in addition to the internal chain product quality management, the control of suppliers can directly affect the cost of downstream chain enterprises' quality control of their products. This is because if we can actively and effectively control upstream suppliers, suppliers will actively maintain their relationship with buyers while making certain concessions, which will naturally strengthen from within the supplier. Quality management and control, thereby reducing the costs of chain companies in this regard. In addition, after the chain enterprise and the supplier reach a certain consensus, the chain enterprise can more actively formulate the characteristics and quality of the goods provided by the supplier, and through some specific investments, and help in technology and management, To achieve the purpose of enabling suppliers to effectively control the quality of goods. Accordingly, the cost of the buyer itself will decrease.

3. Achieve savings in logistics costs

Chain companies attach great importance to how to bring products to market faster and better. Because with the intensification of market competition, commodities must be converted into profits in order for chain enterprises to survive and develop. In order to win customers and win the market, the management of chain enterprises has entered the management centered on consumers and consumer satisfaction. The supply chain management of chain enterprises has also changed from "push-type" management to "pull-type" management based on consumer demand. But logistics is still a weak link. So, can controlling suppliers reduce logistics costs? The answer is yes.

In the chain enterprise's business process, there is no movement of goods at all times. The chain enterprise buys goods, and the supplier must transport its goods to the chain enterprise's warehouse in various ways. Finally, the product reaches the customer. When the chain enterprise can effectively control the supplier, the logistics management and logistics cost control is not only a unilateral behavior of the chain enterprise, but a bilateral behavior with the supplier. In order to reduce costs, buyers and sellers can control logistics costs through negotiation and establish an effective logistics system. In this way, downstream chain enterprises can get the goods they need in a timely manner, save time, and quickly react to market changes. At the same time, upstream suppliers can also save logistics costs in this process, improve their supply efficiency based on information, and achieve long-term stable cooperation with their downstream chain companies.

4. Effectively control losses

Loss control is an important task for today's chain companies. The loss control mentioned here is actually an effect. It is the effect of controlling losses by controlling suppliers. Therefore, the method of loss control is actually supplier control.

1) Contract loss control

In many cases, the chain enterprises will encounter the problem: because the supplier fails to fulfill its obligations in accordance with the content of the contract, it has caused serious economic losses to itself.

The supplier and the chain enterprise usually complete the transaction by signing a contract and fulfilling their rights and obligations stated in the contract. So, how can we control the losses caused by contractual risks? It is helpful to solve this problem by controlling suppliers. Because once the chain enterprise and the supplier have a trading relationship under certain conditions, and both parties are willing to actively maintain such a relationship, for the downstream chain enterprise, the loss caused by contract risk will be much smaller. Because in this case, although the rights and obligations of the two parties to the transaction may end due to the termination of the contract, due to the restriction of mutual interests, mutual assistance in funding, technology, management and services will continue. For suppliers, in order to maintain and continuously promote the cooperation between the two parties, considerable attention may be given in this regard. If suppliers are properly controlled in some way, contract losses can be reduced to varying degrees.

2) Market risk control

Due to the further development of the market and insufficient information, market demand is also undergoing rapid changes. Many chain companies have made great efforts in market sales, including publicity, promotion, etc., and want to use these methods to achieve the purpose of occupying the market. But for some chain companies, this approach has had little effect. Demand information is continuously transmitted upward from the end of the supply chain, and then a series of reactions are made by suppliers, and production and sales activities are carried out. At this time, logistics moves from the initial link of the supply chainthe supplier flows to its endthe end customer. Changes in market demand will directly affect changes in information. Due to the continuous improvement of information technology, market changes can be transmitted to chain enterprises through information in a short period of time, and what chain enterprises need to do is to respond immediately based on market information. If we can reduce logistics time and costs by controlling suppliers, it also means that chain companies can act faster and seize the market. We can see that many large chain companies today can respond very quickly and adjust their merchandise and marketing strategies after getting the actual market information, and all of these are closely related to suppliers. Therefore, for a chain company, establishing a good supplier control system can not only reduce costs and control the risks caused by its upstream suppliers, but also indirectly reduce losses that may be caused by market changes.