Suppliers are boosting innovation in order to compete

Tuesday, September 8David Rae in Global Sourcing, Strategic Sourcing, Supplier Relationship Management, Supply Chain Management

While the global economy continues to trace an uncertain path through this economic minefield, it is perhaps worth remembering some of the positive aspects to have come out of this period of doom and gloom and a recent story reported by Procurement Leaders is a good example.

The article is about how low-cost country suppliers, faced with dwidling markets and struggling clients, are having to up their game in order to compete, not just today, but, perhaps even more importantly, when things begin to pick up.

Based on a study carried out by Spenser Au of Global Sources, low-cost country manufacturers will be significantly increasing their spend on research & development in order to compete.
"Since last year, nearly half of China's toy manufacturers have shut down. Surviving manufacturers, particularly at the low-end, are finding their margins have all but disappeared. This has led a significant number of suppliers to invest more in R&D to create differentiated products that can generate higher margins," claims Au.

And the increases in R&D are not insignificant - almost a third say that they will do so by more than 20%.

If ever there was evidence of the need to maintain close relationships with suppliers, this is it. After all when consumer and B2B spending begins to pick up, buyers will not only be looking for the best deal they will be looking for the product which will provide competitive advantage in a recovering economy.