With supply crises continuing unabated, the role played by purchasing managers is more strategic than ever. Between inflation and shortages, buyers' negotiations with suppliers are as essential as they are delicate.
Price increases often unjustified
For several years now, successive supply crises have presented purchasing managers with unprecedented challenges. Right from the start of the Covid-19 pandemic, companies had to deal with shortages of raw materials and electronic components, soaring sea freight rates and various confinements. Today, they face the consequences of the war in Ukraine, from the energy crisis to galloping inflation.
In this tense environment, the purchasing profession plays a crucial role for companies, which are no longer in a position of strength vis-à-vis suppliers. Rising prices make for tough negotiations, especially as these increases are far from always justified.
According to a recent study commissioned by the French National Purchasing Council and carried out by the consulting firm AgileBuyer, inflation is driving 87% of purchasing departments to renegotiate their contracts, and 81% say they are dealing with "profiteering suppliers", who use inflation to raise their prices without any rational explanation. Buyers must also ensure that price increases do not run counter to contractual terms and conditions.
Shortages reverse the balance of power between buyers and suppliers
In addition to these difficulties, the situation is further complicated by shortages. Even though they are less significant than last year, 59% of purchasing managers still expect to be faced with shortages in 2023, down 9 points year-on-year.
The scarcity context gives suppliers the upper hand, making it easier for them to impose their price increases in the absence of alternative solutions for companies. This is particularly true in the automotive, heavy industry and health-pharmaceutical sectors.
Especially as a new risk has emerged: the threat of a Chinese invasion of Taiwan. 26% of purchasing departments have a specific purchasing plan in place should this threat materialize. It would have major consequences, particularly in the automotive, aerospace and defense sectors, as Taiwan is one of the world's leading suppliers of electronic components.
To secure supplies, more and more purchasing departments are planning to relocate certain purchases to France or Europe. 49% said they intend to do so as early as 2023, to avoid shortages but also to reduce their carbon footprint. This figure rises to 74% in the automotive sector, and 83% in the luxury fashion sector.
Despite these strategies, buyers realize that suppliers now have the upper hand. 82% of purchasing managers surveyed believe that their relationship with suppliers is unfavorable, compared with only 39% in 2021.
Finally, the energy crisis has led finance departments to transfer the management of energy contracts to purchasing departments. Astudy by AgileBuyer reveals that companies' coverage of their electricity and gas contracts is insufficient, with 68% of purchasing departments covered for at least half of their consumption.