Suppliers 'deserve a share'

19 September 2007
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20 September 2007 | Paul Snell

Almost 80 per cent of buyers believe suppliers should share in their organisation's success.

In the latest SM poll of 100 buyers, 39 per cent of purchasers said supplier relationship management should include dishing out some financial rewards for effective vendors. A further 39 per cent believed it should happen sometimes. Only 22 per cent were against the idea.

Buyers believed that if suppliers had contributed significantly to their business, by developing new products, sharing in marketing costs or increasing efficiency, they ought to be rewarded.

"The implication is that suppliers bear the pain when the going is less good," said Guy Strafford, client services director at procurement consultancy buyingTeam. But he warned: "Make sure you are rewarding the supplier for the value being brought, and not just because the outlook is rosy."

Steve Graham, director of public sector business at payment network company Oxygen Finance, said: "I would rather pay suppliers more money provided it generates more profitable sales for my business."

The prospect of extra reward is also likely to attract suppliers. "Honey catches flies," said Mike Flanagan, equipment procurement manager at supermarket chain Safeway.

But buyers also warned that any sharing scheme should be clearly defined, and set out as part of a contract. The type of rewards suggested include sharing cost efficiencies or sharing revenues.

Those buyers who disagreed argued that it was difficult to measure the exact impact an individual supplier might have had on a firm's success. Buyers in the public sector said they had no authority to change prices "seasonally".

It was also argued that sharing success could undermine the buyer's attempt to get better deals from suppliers in the future, as it showed the company was financially healthy. Others said that sharing success transformed the relationship, turning suppliers into partners.

Correction: The figures on the SM100 poll pie-chart in the latest issue of Supply Management (20 September) should read; Yes - 39% No - 22% Sometimes - 39% We apologise for any confusion caused.

SMsep2007

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