Buyers prefer long-term deals

A recent supplymanagement.com survey of 100 buyers revealed "83% in favour of longer-term relationships, while 17% preferred shorter deals".

The respondents believe longer-term contracts deliver benefits to both parties, including:

* price and supply stability

* suppliers better aligned to buyer needs

* buyers better understanding supplier strengths

* opportunities to develop new products, services and systems

* opportunities for suppliers to deliver value-added initiatives leading to greater cost reductions rather than focussing on short-term price reductions

* buyers can incentivise suppliers and share cost reductions

However, respondents recognise that long-term supplier arrangements:

* best suit key suppliers

* need to be maintained and managed properly

* require that performance is properly monitored, managed and leveraged

We concur with the views of the respondents!

While it's sometimes tempting to look to apply high-value assessment techniques and tools to the more transactional segment of the supplier base - because it's the typically the largest segment by number of suppliers, we firmly believe high value assessment tools & techniques are best applied to high-value supplier relationships where the opportunities to extract greater value from relationships (however value is defined) are available. Those opportunities simply often don't exist in transaction relationships and accordingly the investment in seeking to secure greater value is uneconomic.

Source: Supplymanagement.com

17 January 2008 

Author: Derek Groom