Buyer And Supplier Relationships Will Never Really Change.

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Procurement functions far and wide have long claimed buyer/supplier relationships are completely different to how they used to be. They are friends, not enemies. They work closely together. They talk to one another about their long-term strategies and how they can help one another reach those goals.


We have, of course, seen lots of evidence of this. You don’t have to look much further than Royal Philips, which recently told Procurement Leaders about how it has been rebuilding trust with suppliers though a development programme. Or you could cast a glance at Australian miner Santos. The firm picked up the External Collaboration Award at the 2014 Procurement Leaders Awards for its work with one of its suppliers, which helped reduce downtime and cut costs.


Leopards, however, do not change their spots.


Over the past few months, there has been a steady stream of stories that suggest things might not have changed as much as we might like to think they have.


Just this week, the Daily Telegraph reported Tata Steel had sent a letter to its suppliers demanding an immediate 10% cost reduction on all purchases. The demand was made in, what the company said, was an effort to try alleviate the financial pressure being exerted on it by the collapse in steel prices.


The bad news didn’t end there for these suppliers though with the letter going on to say that these cost reductions were likely to increase to 30% over the coming months.


It isn’t just Tata Steel though. Here is a selection of headlines from recent months:

For BP read falling oil prices, for Samsonite and Wal-Mart read the devaluation of the Chinese yuan and for Volkswagen read potential fines following reports that its cars were fitted with software that could cheat emissions tests.


In each case, when external pressure was exerted or they thought a supplier was gaining an advantage that wasn’t immediately being passed on, demands were made for a cost reduction.


It seems that no matter the rhetoric and no matter what programmes are put in place, when the going gets tough or there is even a glimmer of a cost-saving opportunity, suppliers inevitably get the tough treatment.


There is no real, genuine trust, just costs.

Tim Burt
Posted by Tim Burt

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