JCB digs heels in on prices

8 December 2008
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08 December 2008 | Paul Snell

Purchasers need to prepare an urgent response to the economic conditions to demonstrate leadership to their business, according to the head of procurement at JCB.

Trevor Latham, group purchasing director, told delegates at a Prestige Purchasing seminar last month, the situation required fast, focused and flexible action from procurement teams.

"The biggest issue for [buyers] is the expectations from our bosses and the owners of our companies on supply chain and procurement are far greater than they were before," he said.

"The pressure on my shoulders in the last few months has been enormous and the most I have felt in a long time because everybody is looking to the material cost or purchasing cost to get us out of this."

"If you haven't already done so, prepare your plans for your board and your boss to say 'this is what I can do, this is what purchasing can do to get us through this'. These are the actions we are taking. Don't let them come to you and say 'what are you doing about it?'"

He added buyers needed to get suppliers in as soon as possible to discuss price reductions, now material costs were falling. He said his team was asking vendors who had asked the firm for price increases to come in for discussions, and the speed at which they did this would have a big impact on the business.

"I wasn't suggesting you tear the contracts up but it's time to say - and don't be embarrassed about it - whatever we agreed six months ago, is just not relevant at the moment."

He also said 3 per cent of JCB's supply base had gone into administration in 2008, the firm was losing four or five vendors a week and the situation would only get worse. The company is producing a supplier risk report every week for purchasing teams and business areas, because many of the products it buys are single source, and any disruption could shut down production.

Latham added it was important to understand what suppliers think of your company. He described an exercise the firm had undertaken where the purchasing team had rated its top 40 suppliers on a scale of how important they thought vendors considered JCB to be, and then asked suppliers to do the same.

"The response from suppliers base was somewhat different, because 60 per cent did not rank JCB as highly as we thought they would."

SMdec2008

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