Recession driving stronger supply chain partnerships

The Confederation of Business Industry (CBI), whose annual conference takes place this week, anticipates that “a more collaborative, less transactional world” where “closer relationships with customers, suppliers and shareholders looks like becoming the norm.” In a report released to coincide with the conference, the CBI suggested that the current economic crisis and subsequent period of recession had become “a catalyst for a decade of business change.” The way that companies work with their partners would be a key theme as the economy moved out of negative growth. The report, The Shape of Business – The Next 10 Years, said that because of concerns over a “domino effect” in the breakdown of supply chains and the inability for many suppliers to secure trade credit insurance, was likely to persuade companies to improve their relationships with key partners. This would also help to enable purchasers to gain greater control over ongoing risk and increase supply chain efficiencies.

 

The report stated, “finance agreements in the supply chain are now perceived by many as less risky than bank lending – as customers, large businesses will have a very good understanding of suppliers’ peaks and troughs in demand, and they will also be willing to work with them to ensure their survival.”

 

The report was supported by MORI research surveying business leaders and sponsored by CBI. The research uncovered a change in attitude towards supply chains and financing. A key priority for 68 per cent of the poll was to improve collaborative relationships with suppliers. The issues causing greatest concern were suppliers not being able to secure working capital, specialist suppliers going out of business and a vendors’ own supply chain collapsing. Almost a third of business leaders surveyed said that they would be minimizing risk by increasing their supplier base, while 25 per cent suggested that they would offer finance to key suppliers to help them stay in business.

 

Catherine Dickinson, November 2009

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