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Home » Featured, News

Sony to halve number of suppliers; reduce costs

Submitted by on Tuesday, 26 May 2009One Comment

sonyThe business side of gaming is rarely as exciting as the actual gaming side of the industry though it is important to note that certain decisions made by the guys in suits often have a direct impact on the guys donning t-shirts; be they the creators of games or us consumers.

After reporting its first loss in 14 years, Sony are now pulling out all the stops in an effort to make their business more efficient, including looking at new and inventive ways of cutting a dollar here and not spending a euro there.

One fairly obvious way of driving down costs is to work with fewer companies and negotiate lower prices based on the pretext that, as preferred suppliers, Sony will send more business their way.

Reported by the Associated Press, this aforementioned practice is just one measure of a focused drive Sony are following in an effort to introduce some centralisation to how they do business. With each department within the overall company currently operating autonomously, the electronics giant suffers from a degree of territorialism; a silo mentality where each division fails to communicate with one another and therefore loses out on economies of scale. One way to put it is to imagine Sony as a football team with each player going to the same supplier and buying their own kit and boots. If only there was a manager around to actually buy all the equipment at a reduced cost then the team as a whole would save money.

With CEO Stringer already capturing ex-IBM Global Managing Partner George Bailey for the role of Chief Transformation Officer, Sony are embarking on a plan of consolidation; working together as opposed to apart in an effort to drive down cost and improve efficiency.

One such path, and mentioned above, is how Sony interacts with its parts suppliers. At the moment, Sony engages a whopping 2,500 manufacturers for the raw materials that go inside your PS3, PSP, Vaio laptop, CyberShot camera, 200Mhz MotionFlow enabled Bravia and the myriad of other products that form part of Sony’s extensive electronic catalogue. This number will be slashed by more than half to 1,200 in 2010.

How does this affect you? In the short-term, it doesn’t. But, if you’re one of those people that just loves to speculate about impending price cuts, such an action will only come about when the powers that be at Sony are confident savings can be made in other areas. Areas such as reducing their number of suppliers and hence getting more bang for their buck for instance. Cheaper operating costs mean, eventually, cheaper PS3s. Cheapear PS3s mean more people adopting the brand. More adopters equates to more games being made. You can see where we’re going with this.

So, in the long term, this decision does actually impact us – the gamers.