Squeezing your suppliers will deepen the recession

New MCA report finds that only 1 in 8 businesses are planning to work with their suppliers to get through the recession...

A new report, published by the Management Consultancies Association (MCA), says that businesses must collaborate with their suppliers to help everyone through the recession and speed up the economic recovery. The report, which surveyed consultants who work with more than 90 of the FTSE 100, found less than a third of businesses have good relationships with their suppliers, and only one in eight are planning to work with them to get through the recession.

The report also found that only half of businesses have tried to involve their suppliers in order to reduce costs, and over a third have failed to adapt their supply chains in response to the changing economic conditions.

Supply chains are more vulnerable in this recession

The report says that the rise in globalisation since the last recession has produced ever more complex supply chains. This has left companies more exposed and highly vulnerable to the chance that the failure of one supplier will bring the entire supply chain to a halt. At the same time, customer expectations are rising, leading to demand for ever faster delivery in smaller slots, with lower prices and extended credit terms.

The report, which introduces a series of articles from MCA member experts on supply chains in a downturn, highlights the following areas for action:

* Reduce the complexity of supply chains

* Identify and focus on profitable lines of business

* Collaborate with key suppliers to reduce costs and improve product availability

* Ensure that all processes are agile and can be adapted to meet rapid changes in demand

Alan Leaman, CEO of the MCA said:

Britains businesses should stop behaving as if the recession will be short-lived. If it is as long and deep as most now believe, it will be even more important to collaborate with suppliers.
Good businesses need to put more effort into improving relationships with their suppliers and working with them to find common solutions, rather than just seeking cost savings. Recent savings have already been substantial, but are likely to be one-off and difficult to repeat. Further action will be needed.

Commenting on the need for collaboration, Alan Braithwaite, Chairman of LCP Consulting said: If organisations build and nurture key supplier relationships along the supply chain they will ultimately help their suppliers give them more for less. For many this will be a new skill and mindset. The future will be about co-operating and competing through shared supply, manufacturing capacity, and distribution and logistics.

Commenting on the importance of supply chains in a downturn, Nigel Issa, Associate Partner at Atos Consulting, said: As the downturn continues, supply chain vulnerability will be one of the highest risks organisations face. Although many leaders recognise the need to understand supply chain risks, few organisations have the capability to identify and manage them.

Tim Lawrence, Leader of Supply Chain Services at PA Consulting, added:

"Customer driven supply chains have been found to deliver significant benefits for organisations, including inventory reductions of 15 per cent and a 60 per cent faster time-to-market. This makes this approach really relevant in todays trading environment"
Other key findings from the MCA report are:

* 94 per cent of businesses said that cutting supply chain costs, along with improving efficiency and productivity are their top priority

* Over half of businesses expect their supply chain to become more complex in the future

* 40 per cent of businesses view reducing their carbon footprint as less important than they did a year ago; almost 30 per cent have cut back on their investments in this area

For a copy of The Weakest Link?, please contact Hilary Downes at hilary.downes@mca.org.uk or tel: 020 7321 4810.

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