Late payments make suppliers less willing to share innovations ©  ipopba/Getty Images
Late payments make suppliers less willing to share innovations © ipopba/Getty Images

Suppliers 'withhold innovations' from late payers

29 June 2021

Almost a third (29%) of suppliers are less willing to share innovations with late-paying customers, according to research.

The study from Ivalua also found 59% of suppliers said price pressure also impacted how willing they were to share innovations.

The research, conducted by Coleman Parkes, surveyed 300 suppliers across the UK, France, Germany and Switzerland, to examine their relationship with buyers.

It concluded the financial impact of the Covid-19 pandemic had delayed payments and kept focus on cost, and this was adversely affecting supplier relationships and access to innovation.

The research showed late payments had a knock-on effect across the supply chain.

Suppliers said they had to extend or open lines of credit otherwise not needed (41%), delay delivery of products or services (34%), and increase prices or reduce discounts (33%). Almost two-thirds (65%) said late payments put them at financial risk.

According to the survey, 60% of suppliers had been asked to extend their payment terms by customers in the last 12 months, but 30% reported late payments had increased.

Late payments negatively impacted relationships between buyers and suppliers, limiting collaboration and willingness to share innovations. The study found 23% said late payments also stifled innovation.

The report said: “It’s clear that value-driven supply chain management is a key driver of product innovation. It’s clear those who don’t pay suppliers on time risk missing out on opportunities to create innovative products, in turn limiting their business growth.”

The research found 89% of suppliers felt pressured to reduce costs beyond what was reasonable, and 59% said price pressure impacted willingness to share innovations. 

Only 28% of suppliers said they were routinely collaborating with organisations on product or service innovation.

According to the report, 67% of suppliers found buyer procurement systems a challenge to use, further limiting their ability to collaborate with other organisations. The biggest barriers were access costs (40%), difficult to use systems (38%), and difficulty sharing information (34%).

Alex Saric, chief marketing officer at Ivalua, said even in difficult times companies should build strong supplier relationships to tap into innovation and minimise supply chain disruption.

“Improving visibility and timeliness of payments is the single most impactful way to help organisations become a supplier of choice,” said Saric. “Organisations must modernise procurement tools to enable on time payments and give suppliers the visibility needed, thereby bolstering relationships.” 

Suppliers said buyers focused on quality (62%), cost (59%), and speed (49%) when selecting suppliers, as opposed to strategic factors such as supplier innovations (37%) and payment terms acceptance (27%). More than half (53%) of suppliers said their relationship was purely transactional.

“To drive efficient and scalable collaboration, organisations must take a smart approach to procurement that removes barriers to cooperation, improving visibility and giving suppliers the tools they need to share insights easily,” Saric said.

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