Customers are making significant changes in their supplier arrangements
Symptom: Customers are making significant changes among their suppliers.
Implications for the market:
A company that would be a leader in its market must gain and maintain the primary position with a significant number of its customers. This is because the difference in volume between any position in the customer relationship and the next position down is dramatic. In many industries, the primary position has more than two times the volume of the secondary, which in turn may have several times the volume of the lower positions.
To maintain a primary position with customers, a supplier must meet the specific needs of each customer segment.
Customers usually allocate volume to additional suppliers because their primary supplier fails them.
Typically, customers turn to additional suppliers for product availability insurance (especially in periods of high demand and product shortages), for special products for price points not carried by their primary suppler, for good information on market pricing, or for price leverage.
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Perspectives: Conclusions we have reached as a result of our long-term study and observations.