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Sustaining suppliers existence now top priority - Procurement Leaders Exclusive
Sustainability is taking on a whole new meaning as the credit crunch continues to wreak havoc across the global economy.
Colin Maund, CEO of sustainable procurement specialist Achilles, believes that many companies are now extremely fearful that key suppliers are simply going to disappear – a concern that is placing procurement under increasing pressure.
“We’ve reached the stage where it’s not just about prices, it’s about something far more fundamental,” he told Procurement Leaders.
“Companies are starting to ask questions about the financial solvency of their suppliers, and with things getting progressively worse this is now becoming a major issue.
“In the past suppliers would occasionally disappear but it was never an every day occurrence, now there’s a genuine fear that a large number of suppliers could just disappear overnight.
“The priority order for sustainability is moving away from climate change towards ensuring that key suppliers will still be in business.”
Despite these worries, however, Maund believes that the current situation does place procurement in a strong position when it comes to introducing and enforcing a more ethical approach across their entire supply chain.
“Buyers are now in a stronger position that they ever have been,” he said. “In a sense suppliers are more malleable. During the boom time a company faced with a sustainability study could brush it off – now no one wants to upset a purchaser, particularly in a highly susceptible sector.
“People in these positions can now be completely clear with suppliers on what they want and expect.”
The global scope of these supply chains does though, pose a growing headache for procurement operations.
“Companies have got very large and complex supply chain,” Maund said. “Ten years ago, for example, procurement knew it could get suppliers on the phone and manage any problem in what was a relatively short and simple supply chain in a fairly short space of time. This has completely changed.”
Whereas the initial economic crisis appeared to be restricted to the banking industry, Maund now believes there’s a growing realisation across all sectors that these issues are spreading well beyond “a few naughty banks”.
“In the past month there has been a dramatic change in mindset,” he said.
“Now companies are beginning to question three things; firstly whether they themselves will go bust; secondly whether their major suppliers will go bust; and thirdly the potential price impact of businesses inability to raise credit – something that could potentially force prices up extremely quickly, even though commodity prices are coming down.
“I think the scale of the impending situation is only just beginning to sink in.”
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