Free Essay

Chess Board

In: Business and Management

Submitted By khannaaman1984
Words 369
Pages 2
In a seller’s market, buyers must adopt new tools and strategies to compete effectively on a new playing field.
Consolidating supplier markets, rising energy prices and the growing demand for raw materials in emerging markets have fundamentally changed the purchasing framework. Suppliers are more powerful than ever, which means buyers must adjust quickly to a new playing field. A.T. Kearney developed The Purchasing Chessboard—a compilation of insights and experience from thousands of purchasing projects performed worldwide—to help procurement professionals master the tools of their trade.
The Purchasing ChessboardTM
Buying in a seller’s market
Since the 1980s, most procurement professionals have operated in a buyer’s market. Using relatively simple tools—RFIs and RFPs, bundled products and services, and multi-year contracts—companies could negotiate from 1 to 3 percent annual price reductions from suppliers. But this
“golden age” of purchasing appears to be over. The ongoing consolidation of the supplier market, rising energy prices and the increasing demand for raw materials from emerging markets means more companies are in a seller’s market. And buyers must adopt new tools and strategies to compete effectively on a new playing field (see sidebar: A New Playing Field on the next page).
New Strategies in a Seller’s
Market
In a seller’s market, old purchasing strategies such as pitting suppliers against one another, or simply requesting price reductions, do not work. Suppliers can and will casually raise their prices by 5 percent or more and often are not willing (or able) to ensure supply safety. The shift in power to suppliers requires buyers to adjust their strategies. In a recent
A.T. Kearney survey, we discussed the impact of this new seller’s market with more than 200 CEOs and managing directors of major companies.
Among the most often heard remarks about the market is that their procurement departments are not up to the challenge. “We have a deficit in know-how among our procurement professionals,” explains one survey respondent. “There is also a lack of knowledge about how to use analytic tools to improve the process.”
The Purchasing ChessboardTM
To help procurement professionals master the tools of their trade, we developed The Purchasing
ChessboardTM—a compilation of insights and experience from more

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