Supply Risk Warning Signs: Watch for Declining Margins

Buyer Analytics recently quoted some data that you might have read on Spend Matters, regarding price increases from Dow and others. But I like the simple spin that the anonymous Dave M. put on it. Dave's advice to "monitor your key supplier's margins" is perceptive for two reasons. One, as he suggests, it can help portend supplier price increases. But more important, in certain at-risk industries such as automotive, margins can also suggest whether or not a supplier is going to survive given inflationary pricing pressures and declining sales. After all, if a supplier is not making money -- contrary to what GM used to believe -- they're not someone with whom you should be working in the first place. In my view, companies should begin incorporating supplier financial data into their spend visibility information. This insight should supplement D&B risk and other related enrichment fields to provide a complete picture of how your suppliers are performing -- and whether they'll be able to honor their contractual commitments to you.

- Jason Busch

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