Buyers have been told not to take advantage of low commodity prices at the expense of long-term supplier relationships.
Consultancy firm GEP expects commodity prices to be “historically low throughout 2017”, and said while businesses should enjoy lower prices they should not do so “at the expense of building long-term supply relationships that drive down the total cost of ownership”.
In its Procurement Outlook Report 2017, GEP said it “believes that procurement professionals should develop strategies to mitigate the risk of volatility in commodities markets, not just lower the price of each unit”.
The report looked at a number of trends the firm thought would affect procurement professionals.
Increasing populism and protectionism in global markets would increase purchasing costs, the report said, and it suggested businesses look for local suppliers “as tariffs and other policies drive up the cost of imported goods”. Geopolitical instability also means businesses will have to manage supply chain risk better, the report said.
“Procurement, specifically, will be expected to identify, mitigate and monitor supplier performance with respect to potential risks to ensure efficient supply,” it added.
The report also said that despite a perceived move away from environmental and sustainability goals by governments – most notably the US who’s new president Donald Trump might take the country out of the Paris agreement – many corporates are still pursuing sustainability goals. It will be the responsibility of the procurement function to factor these aims into their relationships with suppliers.
“Procurement will need to clearly define sustainability goals and objectives and build them into longer-term contracts with suppliers,” it said.
Buyers were also advised to embrace transformative technologies by moving onto “cloud-based solutions that are scalable and do not require substantial investments”.
☛ Want to stay up to date with the news? Sign up to our daily bulletin.