IS THE TUG OF WAR OVER TERMS AT AN END?
Andrew Jess, VP Basware UK
Buyers and suppliers have always been locked into a tug of war over terms. As one side gets the upper hand, the other would be pulled over the line. However, squeezing price, year after year, against a backdrop of rising inflation, has become unsustainable. This is not to detract from procurement teams or contract negotiators. However, if consistent drops are delivered year after year you have to wonder why the original price point was so out of line. The reality is that efficiencies and cost reductions are not as simple as beating a lower price out of your supplier. But push those cost reductions too far, and you increase the supplier risk and potentially compromise the service you’ll receive. More companies are becoming aware of the dangers of squeezing suppliers too much. Without price per unit decreases to deliver reductions in expenses many businesses are looking to alternative means to reduce costs in the procurement process. In the process many are finding new benefits from their business networks.
Whether joint products and services, flexible credit or access to a network of new partners and customers, buyer/supplier collaboration can bring huge benefits to the wider business. Whilst historically the negotiator played their cards close to their chest, collaboration requires greater transparency, allowing suppliers and customers into financial and procurement processes. Without open discussions and transparency around the status of payments and invoices, both internally and externally I might add, it’s very difficult to realise the benefits of buyer/supplier collaboration.
More often than not each business’ goals are more compatible than many may think. Both want to expand their business, both want to hold onto their cash for longer, both want to get paid quicker and both want a clearer view of the risks they are bringing into their business when they work with new suppliers or buyers. A rash of new services have emerged that allow both sides of the battle to get what they want, provided they play nice. Alternative payment services such as invoice financing, where both have to provide information about invoice status and payment, can mean both sides get to hold onto their cash for longer.
The virtues of business networks are also relatively unsung heroes when it comes to wider business impact. These networks present opportunities to find new customers, service providers and partners. When these previously unseen communities are made visible by open B2B commerce networks procurement and finance professionals can spot new opportunities and areas of overlapping interest.
Whilst contract negotiators will still salivate over percentage decreases more businesses are becoming open to the additional opportunities that buyer/supplier collaboration can create. As the economy emerges blinking from long stagnation and recession I hope this habit continues and our B2B communities benefit as a result.