The importance of a strong marketing function is universally recognized, and every company invests enormous effort in “out-thinking” the customer. But how much energy is the corporation, as customer, spending to out-think suppliers marketing to it? The answer in many cases is not much. Most companies have historically neglected the “reverse marketing” function (or “purchasing”), and many Fortune 1,000 companies waste several hundred million dollars each year as a result.
In the 1980s, many manufacturers instigated a purchasing overhaul. However, they focused on purchases that typically fall within the purview of purchasing departments, namely, “direct” purchases or “cost of goods sold.” The vast array of expenditures dubbed “indirect” purchases went almost untouched. A model of purchasing excellence emerged that eschewed free-market competition in favor of supplier “partnerships.” In some cases, companies extended the notion of partnership to cover areas in which it had little applicability. As a consequence, they sheltered many large supplier relationships from rigorous competitive scrutiny and seldom realized the potential economic leverage from hard-nosed reverse-marketing.
During the past few years, some firms — particularly in the service sector — have acknowledged the chronic neglect of indirect purchasing and are redefining canonical approaches to the subject. Companies such as American Express, Sears, and Chemical (nowChase Manhattan) Bank have launched campaigns to tackle indirect purchases head on, using various free-market approaches. The results of these... To read the complete article, login or sign-up using the form below.
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