The rise and rise of procurement
What it means for the buyer-supplier dynamic
The role of procurement is growing. No longer is it just about finding reliable, affordable suppliers – increasingly it is about ensuring suppliers meet stringent standards around tax, price and customer service.
The upshot is that buyer-supplier relationships have never been more important, or more valued. Some may believe that tighter procurement is to their detriment, but we see time and again that a business-to-business relationship entered openly and candidly is on the right footing from day one.
Buyer-supplier relationships are, after all, relationships like any other. The tacit presumption of certain ways of working often lead to communication troubles, seeding the beginnings of a relationship breakdown.
Take invoices, for example. A supplier’s presumption of 30-day payment terms, when a business usually pays to 120-day timescales, soon causes ruffled feathers. That’s why Tungsten Network provides an online platform so buyers and suppliers can clearly see when payments are due to be made.
It’s this transparency that is the essence of sound procurement – and something many businesses are waking up to, in particular those in the SME bracket. In research published by Tungsten Network, the majority believe procurement plays a more important role than sales and marketing.
In fact, the survey revealed startling figures on the amount of money SMEs believe they could save by shopping around for better deals. Some 28 per cent thought they could save between £5,000 and £20,000, while 15 per cent thought they could save up to £50,000. Based on these average estimates, each SME could save £19,663 each year.
The same research showed that these figures are likely to fall in the future. Of the small businesses we questioned, 70% said more attention is being placed on the amount paid for goods and services than in the past.
Approaching business relationships with a procurement mind-set is vital. With good market intelligence and a clear brief from the outset, both parties stand to benefit. It’s also important to continually assess how those relationships are changing and developing.
According to our research, this is one area where businesses are highly inconsistent. Around a third (36 per cent) review their supplier base annually, while a fifth (19.8 per cent) do so two to three times a year. Some six per cent only carry out a review of their suppliers every two years or more, with a quarter (26 per cent) doing so on an ad hoc basis or when dissatisfied.
There is no right or wrong timescale for supplier reviews, but a consistent approach ensures any issues can be ironed out quickly, rather than being allowed to fester and lead to a relationship breakdown – a costly outcome for all sides.
The fact is, buyers rely on suppliers as much as suppliers need buyers. With honesty and transparency at the heart of these relationships, business-to-business relationships can flourish.