So what does this mean for procurement? Well it requires a bit of thinking and a
change of behaviour.
When your popcorn is ready to eat the rate of pops drops,
but if you wait for them to stop altogether you have overcooked it. If you wait
for all signs of recession to be gone you will be in the midst of the boom. The number of suppliers going out of business
will drop, but some will still fail even though the finish line is in front of
them. Continue to be careful about the financial
health of suppliers. The recovery can
finish off some companies because of the need to increase capacity, hire new
staff, and rising input prices which is hell for the Cashflow.
The recession was all about forcing down prices, and costs
out. This often meant wage freezes and
hiring freezes. So there is no pent up
demand for wage rises, which will eventually have an impact on prices. Suppliers are going to be much less willing
to agree bottom rates in return for guaranteed work – a long contract could
leave them exposed.
A lot of suppliers mothballed or closed capacity during the
recession. This means firstly that they
have to invest to re-open that capacity, and secondly that there might be
supply shortages. Both of these will
also tend to increase prices, but availability might be low. Suppliers will sensibly bottom slice their
lowest margin business, so if you are still in “recession mode” pressing for
the lowest possible price then you might struggle for supply. Once survival is guaranteed suppliers are
going to look for the “fat” to put on their bones for next time.
Many suppliers ran staffing at minimum levels. As the recovery develops the job market will
open up, and staff will be looking for promotions just as suppliers need more
personnel to cope with increasing demand.
So again there are likely to be price rises and gaps.
And suppliers may no longer be quite so keen on your
work. If there is more to go round, they
can be more selective. If they have a
limited supply and can get good prices wherever they go, then they will select
customers on other critieria – like how you treated them during the recession. It’s a bit late to worry about the
consequences of that now, but you might want to find ways to apologise for
beating them with a big stick for the past 5 years. Or of course to remind people about your
support of them during hard times.
So, just remember that things are changing, and change is
dangerous. Make sure you are not stuck
in the mind set of the past five or six years and suffer as a result.
(The cherry blossom in Leeds always told me that Spring was on the way or here already)
Posts
