The global economy remains in a state of flux. Are we heading for a global recession? Who really knows, however uncertainty is our biggest enemy in predicting and steadying the supply chain. The result is a reluctance to make a commitment as all organizations want to nullify risk.
For Buyers, there is a drive towards fixing costs. For Suppliers, they fear losing money because they cannot pass on inflationary increases. These conflictory positions place additional pressure on already strained relationships. The dilemma is that maintaining a fixed price could force supply organizations into bankruptcy, evidenced in the construction and retail industry. For customers insisting on fixed price, suppliers either add overly cautious premiums making the arrangement untenable, or walk away and no-bid. This serves nobody.
To avoid the zero-sum game, organizations need to determine how arrangements can be structured to create a shared risk/ shared reward. Central to this approach is creating transparency to move the relationship from away from transaction to collaboration. Transparency equals trust, and whilst full ‘open book’ may be a bridge too far, there are different overlays that can be applied to help formularize the demand, cost and value drivers.
Defining and structuring appropriate parameters, as well as changing the bid by bid transaction mindset, will encourage relationships to be developed that buffer and stabilize the supply chain. We call that a win/win.
AYSCO CONSULTING 