Sunday, 3 March 2013

Procurement: Put Yourself in the Suppliers’ Shoes

Authored by Shayda Sharfaei

The procurement industry talks a lot about supplier risk and
supplier management, but what about ‘buyer risk?’ More and more stories are popping up in the news and industry publications about big companies – with large cash flows – that aren't paying suppliers on time, or at all.

Bottom line: Failure to meet contract terms (by the supplier or buyer) is a sign of a poor partnership.

Yet, buyers are also now building longer payment terms into contracts, up to 180 days. While that keeps cash in a company’s pockets for the short term, it has a tremendous impact on a supplier’s financial health. And in turn, the supplier’s value and perception of the buying organisation is negatively affected.

Procurement Leaders’ Tim Burt recently summed up procurement’s role in the payment cycle:

“It is a difficult path for procurement to tread because of the fact that the function operates at a junction between the business and suppliers, with responsibilities towards the former which rely, in some sense, on their performance in handling the latter.”

If a certain supplier is critical for meeting customer demand, why would you put that supplier in financial jeopardy?

1 comment:

  1. its always been the case. the bigger and mightier rules the ship. the business partnership is normally one way road where either of them is dependent on each other. The clear your weekness the easier to exploit