Procurement Intelligence Unit

It would be easy to assume that the mere mention of demand management would be enough to bring the majority of suppliers out in a cold sweat – after all, if demand drops then so, it's natural to assume, do order volumes.

However, as the recently published Procurement Intelligence Unit report on demand management would appear to suggest, working collaboratively with suppliers can bring some unexpected benefits, not just for procurement organisations – but for suppliers themselves.

From a procurement perspective, the key element here is ensuring that the channel of communication between buyers and suppliers is opened at the earliest available opportunity. This doesn't only ensure that the supplier feels involved in the process at the earliest available opportunity, it also means that expensive mistakes – such as overspecing items in the original instance - are avoided.

And even though suppliers may notice a lower volume of business, those that truly engage in the process might be able to reduce the total cost to a customer without damaging their own bottom line. This, surely, is the definition of a win-win scenario when it comes to supplier relationship management.

However, in the same way that there may be some awkward discussions and sticking points between procurement and internal stakeholders - the very nature of demand management means that budget holders are being asked to question decisions that may have become second nature – then conversations between procurement and suppliers can deliver some similarly uneasy moments, particularly if the relationship between the business and the supplier has been established over a long period of time.

Of course, the alternative to engaging with your supply base is to take a more dictatorial, top-down approach – one which is unlikely to enhance procurement's standing with the supplier, and one which is also unlikely to deliver any significant benefits over the longer term.

It's all too easy for procurement, and companies, to take a blinkered approach to demand management. By involving suppliers, then not only are these blinkers removed, but procurement can gain a greater perspective of the role that external partners can play. As the report states: "In many cases suppliers will be able to suggest specification changes that can reduce waste, improve efficiency and/or lower costs for their customers." It also notes that: "All too often…they are not invited to share their ideas."

That's a mindset that has to change if demand management is going to make the kind of impact that many companies require. And while seeing your suppliers as an ally in this particular fight might take some getting used to, the benefits of doing so – for both sides – cannot be overestimated.