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 / Fall 2004 / Issue 36(originally published by Booz & Company)


Building the Advantaged Supply Network

Transitioning one business unit, one commodity family, or one component at a time is feasible, and may be advisable. Making incremental changes rather than changing everything at once is both much less difficult and more likely to succeed. But doing nothing is not acceptable.

As competition intensifies, we expect manufacturing companies that stick with the confrontational and transactional pricing model will find it harder and harder to squeeze out costs. Rather than worrying today about giving up a little margin to a supplier in the pricing of a specific part, we believe it is far more cost-effective to develop deeper knowledge of suppliers’ strengths and weaknesses — and help them to improve their business. Ultimately, the proof of our argument is in the outcome. The current bidding model has its merits, but it will not, in the long run, be as beneficial as the advantaged supply network model for managing price and driving innovation.

Reprint No. 04304

Author Profiles:

Bill Jackson ([email protected]) is a vice president with Booz Allen Hamilton in Chicago. He works on major organizational change programs, including restructurings, post-merger integrations, and growth, for a variety of industrial clients, especially in the global automotive industry.

Conrad Winkler ([email protected]) is a principal with Booz Allen Hamilton in Chicago. He advises companies across industries on supply chain management improvement and manufacturing strategies, with a focus on the automotive and aerospace sectors.

The authors thank Brian Long, formerly of Booz Allen Hamilton and currently director of supply chain management for International Truck and Engine Corporation, for his contribution to this article.
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  1. Ranjay Gulati, Sarah Huffman, and Gary Neilson, “The Barista Principle — Starbucks and the Rise of Relational Capital, s+b, Third Quarter 2002; Click here.
  2. Peter Heckmann, Dermot Shorten, and Harriet Engel, “Capturing the Value of Supply Chain Management,” s+b enews, 06/26/03; Click here.
  3. Tim Laseter, Kamalini Ramdas, and Dorian Swerdlow, “The Supply Side of Design and Development,” s+b, Summer 2003; Click here.
  4. Tim Laseter and Keith Oliver, “When Will Supply Chain Management Grow Up?” s+b, Fall 2003; Click here.
  5. Keith Oliver, Anne Chung, and Nick Samanich, “Beyond Utopia: The Realist’s Guide to Internet-Enabled Supply Chain Management,” s+b, Second Quarter 2001; Click here.
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