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Friday, September 03, 2010
Friday, September 03, 2010
Latest Procurement News
Posted: Thursday, December 17, 2009, 2:59PM
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KNOWLEDGE MANAGEMENT TAGS
"Supplier Relationship Management"
Analysis: Procurement could pay the price for lack of SRM
The day of reckoning could be close at hand for procurement organisations at some of the world's largest companies. That's the warning from John Henke, president of US-based consultancy Planning Perspectives, who believes that those companies that failed to develop sustainable and mutually beneficial relationships with their suppliers during the tough times, could find themselves on the receiving end as the global economy recovers.Henke argues that although there have been a number of positive examples of collaboration during the financial crisis, the majority of companies have failed to heed the lessons of the past and could be heading for a fall, particularly at a time when suppliers are beginning to assume a position of strength.
"Suppliers have a choice - and today they have more of a choice than ever because so many of their competitors have gone to the wall," Henke told Procurement Leaders.
He claims those organisations that have fostered close ties with suppliers during the worst economic downturn in living memory are going to find themselves in an unquestionably better position than those that have used the events of the past 18 months as a stick with which to beat their supply base.
"The more strategically orientated buyers have developed better relations with suppliers - unfortunately the majority just ended up hammering their suppliers more than they normally do to get costs out because of pressure from top management," he said. "And the former group of companies are going to be far better off because they've actively worked with their suppliers in order to get as close as they possibly can."
Nowhere has this been better demonstrated than in the automotive industry, where some of the world's major OEMs have propped up a struggling supply base to an extent that would previously have been unimaginable.
However, there is now a consensus that the era of the bail-out is at an end - a leading procurement figure in the automotive industry recently confided to Henke that "the money simply wasn't there" - meaning that a huge number of auto suppliers, once again, face an uncertain future both in the US and Europe.
Last week, the Fitch Ratings agency predicted a 7.8% increase in U.S. vehicle sales in 2010. And while that may represent a considerable bounce back after the travails of the past two years, it has raised further doubts over the long-term health of U.S. suppliers.
"Like we saw with airlines, auto suppliers might not be able to produce enough cash flow and strengthen their balance sheets in the up cycle to survive the next downturn," said Mark Oline, managing director in Fitch's Corporate Finance Group.
"The situation in the auto-sector has been much worse for the suppliers because production cuts have been much steeper than the decline in sales," says Calum MacRae, automotive analyst at PwC's automotive institute. "Inventory management has been a key for the OEMs in this crisis."
PwC's recent EU production forecast for 2009 estimated a 15% decline in production compared with a drop in sales of 7%, and with the OEMs still attempting to supply, wherever possible, out of stocked items, further trouble could lie in wait for suppliers over the next 12 months.
But while the automotive suppliers are still feeling the pinch, suppliers in other major industries could soon be reaping the benefits of the sort of freedom that they haven't enjoyed for a considerable time - and procurement could find itself on the receiving end.
Procurement Tag - Supplier Relationship Management
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