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UNDERSTANDING THE SUPPLY CHAIN

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The question that comes up most often when talking about supply chains is “Who is my supplier's supplier?” These discussions often revolve around the concept of risk and determining how reliable the supplier's supply base is.

When sourcing raw materials, it is particularly critical to understand where the materials your suppliers use are coming from. Generally, in the case of indirect spend, the risk of outage is somewhat reduced—while it may result in inefficiencies in your business, it probably will not stop your business from running. However, there are several reasons beyond just risk to make sure you have a firm understanding of the entire supply chain. Your Research phase is the best time to ask the question, “What type of supplier should we be buying from?”

Each basket of goods or services or individual spend category has its own unique characteristics, and therefore, each has unique types of suppliers that serve the market. The most common types of suppliers that span most categories of indirect spend are local, regional, and national suppliers; manufacturers and distributors; as well as brokers, group purchasing organizations (GPOs), and other third‐party suppliers.

Managing Indirect Spend

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