Low growth and margins prompt rise in supplier collaboration

8 November 2010

8 November 2010 | Lindsay Clark

Working closely with suppliers is becoming the norm, as businesses try to cope with rising input costs and limited scope for increasing prices.

Research from Ernst & Young (E&Y) found the typical company is now embedded in an “ecosystem” of suppliers, collaborators and customers. The study, which was based on a survey of 1,400 senior managers and chief level executives, revealed that 28 per cent of firms were increasing collaboration with suppliers. This figure increased to 39 per cent among those companies E&Y considered ‘high performers’.

Although 29 per cent of respondents reported they were experiencing input cost rises higher than inflation, 60 per cent said they only expected to be able to increase their prices in line with or below the inflation rate. Meanwhile, around 34 per cent were striving to drive down overall costs by between five and 10 per cent.

E&Y’s research also concluded that increased volatility in global markets meant the best companies were able to change strategy more rapidly and implement that through their supply chains.

“In addition to speeding up decision-making, leading performers are also seeking to increase flexibility across the supply chain to respond to diversity of demand as well as volatility of change,” the report said.

“The scale of transformation required in many supply chains should not be underestimated. The response of companies is partly dependent on what they do internally, but also how they interface with partners and suppliers across their ‘ecosystem’.”

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