United against the gloom and doom

29 March 2009

30 March 2009 | Stefan Stern

To keep the electricity bill down, the light at the end of the tunnel has been switched off.

As Woody Allen says in his 1975 film Love and Death, while staring gloomily out of the window:

"Nothingness. Non-existence. Black emptiness."

"What did you say?", his girlfriend asks.

"Oh," he replies, "I was just planning my future."

It's being so cheerful that keeps me going. "There you go again," the irritated reader will say. "Typical newspaper gloom and doom merchant, talking the economy down." And it is true that there is a belief in some parts of the media that bad news sells. According to this view, there is no point in balancing out the grim bits with anything more hopeful. Lay on the angst with a trowel. This recession is providing the ultimate reality check. Purchasers, who are usually among the most committed realists in the building, will have less trouble coming to terms with these conditions than other more naïve or wildly optimistic colleagues. Realism should be what good procurement is all about.

But the reality of the worrying data that doesn't stop coming is that market conditions are bad and getting worse. A new survey of 1,800 UK consumers by the management consultancy Booz & Co reveals that half of them plan to reduce their spending over the next six months, while 63 per cent have already cut back.

"Consumers are becoming increasingly price-sensitive and are making a greater effort to search for value. More than ever, retailers and manufacturers must respond and collaborate in building more sophisticated pricing capabilities," Booz partner Richard Rawlinson says.

In plain terms, that means that purchasers and suppliers are going to have to up their game, and show some imagination. Price promotions on selected, valued items may go down better than a simple across the board price freeze.

The so-called "hi-lo" pricing approach - think Sainsbury's Taste the Difference (premium) and Basics (economy) - could work well. Retailers need to show their customers that they know (and care) about the financial difficulties many of them will be in.

But this goes wider than just the retail sector. Surviving this downturn is going to mean the whole supply chain working together. Smart purchasers won't stand on the wind-pipe of their suppliers to squeeze more life-threatening margin out of them.

What can you do tomorrow in your part of the business to stop panic and depression spreading any further? First: get together as a team and own up to your concerns. There is no point sitting there in anxious silence. Denial is no use either. Share the worries.

But don't give in to despair. The next step is to take time out to think more creatively about your relationships with suppliers.

If cash is a problem for them - and it probably is - are there any barter options you can go for instead? Do you have other suppliers who could help a struggling business out in some way? It is time to think positively about solutions, not sit in the bunker waiting for the end of the world to come.

This won't boost flagging demand in the economy overnight. But it will feel like progress, and that's a start. Just don't expect to see it reported on the News at Ten

SMmar2009

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