>> the pressure on supplier margins is going to intensify
>>THE ISSUES THAT MATTER, FROM THE PEOPLE INVOLVED
More than half of suppliers think their relationships with key customers are the same as they were this time last year. That’s the headline result from our latest survey of those who sit on our manufacturers’ reader panel. And if 55% of suppliers think their relationships have survived intact after a year of serious competitive pressure, then that must be seen as good news. Mustn’t it? Well, up to a point. Dig beneath this figure and you’ll discover that for suppliers ‘the same as last year’ translates as pretty damned tough - and likely to get tougher in the coming year as the pressure on margins intensifies.
You can read the results of the survey for yourselves on page 29. But one of the key messages I take from the research is that far too many suppliers now feel that the majority of the relationships they have with retailers are purely transactional, increasingly confrontational and focused solely on price and margin.
It’s all a bit sad really, particularly given that on a number of occasions in recent months I have heard the bosses of big retailers stand up and wax lyrical about how they are in the business of building partnerships with suppliers. Judging by the feedback from our survey, many suppliers clearly think that the retail troops are adopting a very different view than their generals about how life should be in the trenches of grocery.
I think everybody accepts that the nature of the battle now raging between the big retailers means it is inevitable there will be casualties.
As you would expect, it’s the weak and inefficient suppliers who have been hit first. But now it’s the better operators who find themselves in the firing line. Their costs are going up, their prices are going down, which means they are restructuring so they can meet the demands of fewer, bigger customers while still generating a - shock horror! - profit for their own shareholders.
The result? Factories are shut. Jobs are lost. And, in some cases, manufacturing expertise shifts overseas. This was one of the worrying trends that emerged last year and it looks set to be a key theme of 2005 as well.
Retailers may not think this is their concern. But they would be wrong. And I would urge them to think about the collateral damage they cause every time they try to squeeze their supply base. Because the impact is felt way beyond their own particular bit of the battlefield.
trading at the margin
>>THE ISSUES THAT MATTER, FROM THE PEOPLE INVOLVED
More than half of suppliers think their relationships with key customers are the same as they were this time last year. That’s the headline result from our latest survey of those who sit on our manufacturers’ reader panel. And if 55% of suppliers think their relationships have survived intact after a year of serious competitive pressure, then that must be seen as good news. Mustn’t it? Well, up to a point. Dig beneath this figure and you’ll discover that for suppliers ‘the same as last year’ translates as pretty damned tough - and likely to get tougher in the coming year as the pressure on margins intensifies.
You can read the results of the survey for yourselves on page 29. But one of the key messages I take from the research is that far too many suppliers now feel that the majority of the relationships they have with retailers are purely transactional, increasingly confrontational and focused solely on price and margin.
It’s all a bit sad really, particularly given that on a number of occasions in recent months I have heard the bosses of big retailers stand up and wax lyrical about how they are in the business of building partnerships with suppliers. Judging by the feedback from our survey, many suppliers clearly think that the retail troops are adopting a very different view than their generals about how life should be in the trenches of grocery.
I think everybody accepts that the nature of the battle now raging between the big retailers means it is inevitable there will be casualties.
As you would expect, it’s the weak and inefficient suppliers who have been hit first. But now it’s the better operators who find themselves in the firing line. Their costs are going up, their prices are going down, which means they are restructuring so they can meet the demands of fewer, bigger customers while still generating a - shock horror! - profit for their own shareholders.
The result? Factories are shut. Jobs are lost. And, in some cases, manufacturing expertise shifts overseas. This was one of the worrying trends that emerged last year and it looks set to be a key theme of 2005 as well.
Retailers may not think this is their concern. But they would be wrong. And I would urge them to think about the collateral damage they cause every time they try to squeeze their supply base. Because the impact is felt way beyond their own particular bit of the battlefield.
trading at the margin
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