Monday, December 4, 2023
Monday, December 4, 2023
HomeEditor's PicksNurturing Supplier Relationships to Combat Inflationary Volatility

Nurturing Supplier Relationships to Combat Inflationary Volatility

by Alastair Roy

The doom and gloom naysayers are always around if you care to look hard enough but there is no escaping the current realities of inflation surges, supply chain increases and overall post-Covid and post Brexit disruption across all the supply categories. The other perspective is that there are always challenges of one type or another and we are simply dealing with a different combination of the same theme right now. Change and challenge are the inevitable and arguably exciting constants in business and life. Therefore, best to accept those factors and find ways of becoming more resilient.

Securing meaningful savings in the face of uncertain market conditions requires less focus on the traditional strategies, tactics and levers with a switch to nurturing supplier relationships in the spirit of collaboration. 

The Procurement function can act as the conductor of the relationships between your business and the supplier base to ensure you are best placed to mitigate the cost pressures and help strengthen your own P&L whilst ensuring the suppliers are there to deliver the best value products and services in the future as well as the here and now.

With cost increases proliferating and corresponding savings less obviously available, it can be tempting to switch away from your long-standing supplier relationships to find pastures new to trade with.  Although this strategy can yield results and is often the right move where complacency has set into your supply chain, during volatile times, sometimes the counter-intuitive approach serves the business better. Instead of solely focusing on the values of the cost analysis spreadsheet, perhaps now is a good time to look at the supplier relationship in a more holistic way. Consider the service and quality levels previously enjoyed and how you might be able to strike a new way of working with your suppliers to make their service provision more economical to deliver – not necessarily only in the literal sense – and share the benefits in the form of cost savings to your business.

Break down the internal barriers in your own organisation and ensure there is a co-ordinated approach when dealing with suppliers – try to prevent stakeholders having side conversations with the same supplier, diluting efforts to offset the impact of price increases. Market uncertainty will persist for some time until suppliers and manufacturers regain their own positions. To handle short term cost pressures, consider the risks in your supply chain, minimise spending and push forward with a collaborative approach internally and externally.

Some key pointers to successful collaborations:

– Identify your mission-critical partnership suppliers and where you have previously made good selections in this area, the strong supplier will want to collaborate and grow with you:

– Look for win-wins on both sides and share the benefits

– Reduce consumption and eliminate waste 

look at operating minimums and ensure team members are fully conversant with organisational objectives to steer the business through these choppy waters

– Always look for ways to value engineer and reduce costs all round

Focus on the long game and bring your suppliers on the journey – they will value your commitment to staying in business to help drive value to their business as well as your own

If the only certainty is uncertainty, harness and nurture your supplier relationships to find ways of working collaboratively to take advantage of market conditions, or, at least minimise the adverse impact they may currently create. 

For guidance on how best to nurture your supplier relationships to combat cost volatility, contact alastair@aroprocurement.

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