Procurement: Are We Selling Future Relationships Short?

Tim Cummins always has creative ways of looking at situations. In a recent blog post, Tim questions whether or not "suppliers will show pity" on the tough times that many procurement organizations are going through. Paraphrasing a statement from a member of IACCM a recent meeting, Tim notes that "our industry, and industries like automotive, have destroyed trust and collaboration (with the supply base). Shame on us. Now, as markets tighten and power moves to the supplier, we will reap the consequences of our behavior." To Tim, this suggests that procurement has "been walking down a blind alley. For all the talk of strategy and of reaching the top table, the reality is that many sourcing organizations have been pushed into short-term objectives to grab price reductions, at the expense of longer-term strategic thinking."

What's the solution? Tim is always nebulous with answers but does offer a few difficult to follow sign-posts that point in the general direction of an answer. To wit: companies "need to redeploy their resources to focus on trading relationship outcomes, rather than the short-term, input based 'savings' mentality. They must oversee contract life-cycles and ensure accountability for results." Unfortunately -- and even though I agree with Tim -- I feel that this type of thinking is out of touch with the reality that many tactical sourcing managers face today. Faced with the double whammy of commodity price inflation / supply shortages and the continuing need to reduce costs, procurement organizations are taking greater and greater risks, often pushing their supply bases to the limit, asking for cost reduction across the spectrum of value-added activities (since they can't get it in the raw materials areas).

- Jason Busch

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