Often times an organization may not have knowledge of the existence of manufacturer deviations. Lack of such knowledge can result in lost of significant discounts. Find out where the deviations are located and how to manage them.
Where are deviations common?
Deviations are common in SKU intensive categories where the manufacturer holds the ultimate pricing power and where competition is limited, but still exists. Categories include, but are not limited to, certain areas of Office Supplies, MRO (industrial supplies, facilities supplies, bearings and power transmission, and electrical supplies, to name a few), and IT (hardware, peripherals, servers , tablets, headsets).
How do I take control? The three stages of managing your manufacturer deviations.
Stage 1: Identify
Identifying the existence of deviations can be a more difficult process than you might imagine. It starts with looking at the spend profile for a category and contacting the manufacturers from whom you purchase (whether through a distributor or directly). A strong distributor will help you through this process, but finding the right person to talk to at each manufacturer can be time consuming. Identifying the deviation will help you ensure that you are getting the biggest financial benefit possible from their existence.
Stage 2: Manage
Build a direct relationship with these key manufacturers. They can help you do more than just manage deviations, they can also help you navigate your way through product alterations, ensuring the right usage of their products, and help with understanding what to do with new products that they offer.
Stage 3: Control
Integrate the manufacturer deviation process into both the category RFP process and the category management of existing contracts routinely to drive larger deviations in exchange for consolidation.
The end results
Ultimately both savings and better control over product selection can be achieved through working with manufacturers. In addition, manufacturers may have additional insights into how best to utilize their products and can help you figure out the best products to use for your company.
CoVest members have enjoyed many of these relationships, some longstanding and some new, and the significant savings attached to those contracts. Perhaps your company should as well. We aggregate spend across multiple companies to create a more substantial potential customer base to manufacturers that decide to partner with CoVest.
This has allowed CoVest to partner with more manufacturers on our members’ behalf than they likely could individually. This takes managing deviations to a new level, but at the very least this is an important component of any solid sourcing plan for indirect categories.