Economic slowdown creates opportunities for procurement
IBM's John Paterson says buyers need to take advantage of the slow markets.
By James Carbone -- Purchasing, 5/8/2008 2:00:00 AM
The economic slowdown can be challenging for buyers, but it also offers opportunities, according to the CPO of high-tech giant IBM.
John Paterson says the slowdown has created a buyer's market in certain instances and purchasers need to develop strategies to take advantage of it. However, buyers need to recognize that markets change over time and they should “do nothing which will damage their buying position when it becomes a seller's market again.”
He says in a slowdown, suppliers are “more aggressive in their terms and pricing” since they desire to keep capacity utilized and maintain revenue streams.
“Sharp buyers recognize this and will typically look to place more business up for bid, take actions to renegotiate contracts, and seek out new suppliers,” says Paterson.
Some of those new suppliers will be in emerging markets such as Brazil, Russia, India, China and Vietnam. “The leading local suppliers in these countries are developing export capabilities and will become the global suppliers of tomorrow,” says Paterson.
While there are many advantages to using those new global suppliers, buyers need to be mindful that governments and public opinion question the issue of sourcing from emerging markets due to the “perceived negative impacts upon local markets,” he says.
As the supply base becomes more global so are purchasing organizations, says Paterson, who is based in Shenzhen, China.
“Gradually firms with growing presence in emerging markets are seeing the benefit of locating strategic sourcing and procurement managers in these locations,” he says. “The benefits are that a company gets closer to suppliers in these locations and develops local procurement talent for use in their local and global operations.”
Besides dealing with the economic slowdown and globalization issues, buyers today are making a greater effort to encourage suppliers to develop more environmentally friendly parts that are good for both buyer and supplier.
Suppliers need to “recommend product design changes in order to increase the energy efficiency of end-products as well as to reduce the energy required to produce and distribute the items shipped to their clients,” says Paterson.
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