BA joins fight for suppliers

14 February 2008
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14 February 2008 | Rebecca Ellinor

The balance of power between procurement and suppliers is shifting and buyers must change their approach to vendors, according to British Airways' new purchasing chief. Otherwise they will see goods and services diverted elsewhere.

Paul Alexander warned buyers they must become the "customer of choice" or suppliers may pick someone else to do business with.

"We're moving into a world of scarcity, particularly because of the growth of India and China." Acknowledging the departure from purchasers encouraging suppliers to compete, he added: "My biggest challenge is competing with other buyers."

If a customer orders one of Boeing's new 787 Dreamliner aircraft today, they are unlikely to get it until 2018, Alexander told delegates at a supplier relationship management (SRM) conference in Switzerland. But, he added, good supplier relations mean BA will receive its delivery in 2010.

"This gives tremendous competitive advantage and shows you can win favours from suppliers."

Alexander said gestures as simple as "thank you" letters had helped.

"Even the language you use can drive a union between you and your suppliers. We say things like 'what problem are we trying to solve?' Not too many suppliers are dependent on BA so this approach has been very successful."

He added that about half of BA's supply base is monopolistic.

"There aren't too many places you can get spare parts for Rolls-Royce engines or buy stands [at airports]. We're operating in a world where our suppliers are very powerful.

"Playing suppliers off against each other is not the way of the future. It's a particular problem for airlines but it may also be a problem for you. "You need to get the supplier to internalise you as the 'customer of choice'."

He said airlines were vulnerable to all kinds of disruption - such as weather, strikes and terrorism - and industrial action prompted by the dismissal of Gate Gourmet catering staff in 2005 "made us think about upgrading SRM for the future".

The shift in power was a recurring theme at the event with speakers and delegates. They discussed shortages of some key commodities, from metals to foodstuffs, and how resulting price hikes meant it was vital that buyers had strong relationships with suppliers to guarantee supply and keep cost increases to a minimum.

SMfeb2008

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