Procurement won’t get its own way forever
In these days of increasing constraints on availability of supplies or suppliers in certain key industries are we confident in our ability to secure goods and services in the timescale needed because, in our opinion, we are basically “good guys”?
At the present time the economy is quieter and has been this way for the past few or so years. In certain sectors (e.g. Oil & Gas and Resources) there doesn’t appear to be any real light on the horizon over the short/medium term future. In addition to all of this the knock on effect of the impending cessation of automobile production in Australia may very well exacerbate the frailty of a robust supply base and how much we may take for granted the availability of this infrastructure that can also service the Power Generation, Mechanical Engineering, Water Plants, Road and Rail etc. industries that underpin our economy. The task now facing industry shall be to continue to secure ongoing supplies and services from an ever decreasing supplier base and work closely with them ensure their ongoing health as inevitably what goes around comes around. Might not be too difficult at present, however………
As sure as eggs is eggs the economy shall recover then push on that shall require greater levels of goods and services supplies from a smaller supply base. The pendulum shall indeed swing back in favour of the supplier.
This is certain to cause procurement a major challenge: what must we do avoid restriction, or worse still elimination of security of supply?
When the upturn does happen suppliers may then be able to pick and choose whom they wish to deal with and whom they can afford to drop or restrict as customers. This will largely depend on how they in turn have been treated through the hard times and up till present by their customers and on how close, if any, a relationship they have had with them. The issue facing procurement therefore shall be to continue to fix security of supplies going forward and in all likelihood as per terms and conditions increasingly imposed by the supplier base. Companies may end up finding themselves scratching around for supplies whereas up till present these had been more readily available.
So what kind of a relationship do we currently have with our key suppliers? Do we know? Have we ever asked them for their opinion? Do we just continue to place orders for supplies, pay for these (eventually in some cases) and think that everything’s okay? We may be way off course but we don’t know it (for now)
How good are we at paying for goods and services within stated payment terms? Do we engage our suppliers at the start of any new product or service launch programme and take on board their ideas and suggestions? Do we offer our suppliers benefit of doubt when there are supply issues, or do we just beat them up and assume they’ll roll over? Do we have regular face-to-face business meetings with them where market data and forecast information is shared, or offered? Do we know what’s important to them, or do we just assume what we think this is? Do we establish key performance indicators (KPIs) with them that can be a two way street? The list goes on and on.
If we are or wish to consider our company as customer of choice then we need to work with our suppliers, find out from them what is it we do well, what is it we are not so good at doing, and what, in our suppliers’ opinion can we do to become, in their eyes, best practice customer, and have this done as part of formal and ongoing supplier relationship management (SRM) work activity. I would suggest that if not already begun or in progress we may need to begin to start down this path and develop this sooner than later, so as by the time things do pick up we have a highly motivated and cooperative supplier base that wishes to trade with us for the long haul. To wait till things the inevitable upturn could well be fraught with danger as by that time we may be too late!
