Power remains in the hands of purchasers

31 August 2012

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31 August 2012 | Adam Leach

Suppliers wield no more power than they did five years ago, procurement professionals believe.

According to the latest SM100 poll, when asked: “Do suppliers wield more power today than they did five years ago?” 67 per cent of purchasers said no, while the remaining 33 per cent replied that they did.

The survey follows the victory of dairy farmers whose protests against milk buyers’ plans to cut the price they were paid for milk resulted in all the companies cancelling or postponing their cuts. Although in that sector vendors demonstrated the power of collective action, two-thirds of buyers believe their power has not diminished over the last five years.

Tony Morris, head of procurement at Working Links, said: “No, if anything [supplier power] is less as they struggle for business. A good procurement professional will see this and use it not just to bring costs down but to improve quality.”

Nic Porter, managing director at Procuring Limited, said: “The key to balance of power is elasticity in the supply market. If there is low elasticity of supply in the market then suppliers are more capable of influencing the balance of power. Whereas if there is a high degree of elasticity of supply then the balance of power tends towards the client. The key is to understand the dynamics of the supply market you are in, and then to understand whether you are in a dominant position to influence the demand market.”

But some professionals had noticed a shift in power in some areas. Natalie Henfrey, a senior consultant at Crimson & Co, said: “I think in some sectors it is harder to get that initial engagement with a supplier, there seems to be a more strategic approach to selecting customers and some suppliers focus only on those customers who they know are profitable and will enable them to grow their own business.”

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