10 November 2008
Buyers need to address the causes of hostile and short-term behaviour towards suppliers, according to the participants of a roundtable on performance management last month.
Colin Davies, senior director - worldwide procurement at Pfizer, said combative behaviour towards vendors, such as the extension of payment terms, would not be necessary if companies truly understood where the value was in their supply chain.
He said if the rest of the industry is being aggressive with the supply chain, buyers come under "tremendous pressure" to follow suit. He added: "If you cannot identify those parts of the supply chain that you need to work with to get innovation, to get the security of supply, you are not in a position to resist that pressure.
"We are seeing symptoms in those organisations that are behaving aggressively of their inability, immaturity and lack of capacity to identify where the value is and where to manage it. If they did they'd have a compelling business case not to move with the others and probably would have a competitive advantage."
Many at the roundtable were critical of buyers who have imposed unilateral price cuts - such as those
in the construction industry (News, 31 January) - and exhibited other aggressive behaviour including lengthening payment terms.
According to Greg Brownlee, managing director at consultancy Blake Newport, buyers need to consider if senior management expects them to be proactive about managing relationships in the future: "The consensus seems to be to do anything to rock what can be quite fragile relationships is folly and will probably come back to haunt you."
Heather Rodgers, head of procurement and supplier relationship management at Centrica, said her firm had put a lot of time and energy into dealing with its key suppliers, to ensure vendors would work with the company to get through tough times.
But according to Davies, while purchasers have been effective at identifying which suppliers need deeper and more trusting relationships, there are still issues over how to deal with the remainder. "That's our biggest challenge going forward, not the obvious ones, but the huge swathe in the next level down."
He added purchasers have traditionally thought narrowly about "our suppliers" when they should be thinking about how they can bring their skills and knowledge to relationships the business has with its other partners, such as researchers and universities.