Squeezing Your Suppliers will Deepen the Recession says MCA

A new report, published by the Management Consultancies Association (MCA), says that businesses must collaborate with their suppliers to help everyone through the recession and speed up the economic recovery. The report, which surveyed consultants who work with more than 90 of the FTSE 100, found less than a third of businesses have good relationships with their suppliers, and only one in eight are planning to work with them to get through the recession.

The report also found that only half of businesses have tried to involve their suppliers in order to reduce costs, and over a third have failed to adapt their supply chains in response to the changing economic conditions.

Supply chains are more vulnerable in this recession
The report says that the rise in globalisation since the last recession has produced ever more complex supply chains. This has left companies more exposed and highly vulnerable to the chance that the failure of one supplier will bring the entire supply chain to a halt. At the same time, customer expectations are rising, leading to demand for ever faster delivery in smaller slots, with lower prices and extended credit terms.

The report, which introduces a series of articles from MCA member experts on supply chains in a downturn, highlights the following areas for action:

  • Reduce the complexity of supply chains
  • Identify and focus on profitable lines of business
  • Collaborate with key suppliers to reduce costs and improve product availability
  • Ensure that all processes are ‘agile’ and can be adapted to meet rapid changes in demand

Alan Leaman, CEO of the MCA said:
“Britain’s businesses should stop behaving as if the recession will be short-lived. If it is as long and deep as most now believe, it will be even more important to collaborate with suppliers.

“Good businesses need to put more effort into improving relationships with their suppliers and working with them to find common solutions, rather than just seeking cost savings. Recent savings have already been substantial, but are likely to be one-off and difficult to repeat. Further action will be needed.”
Commenting on the need for collaboration, Alan Braithwaite, Chairman of LCP Consulting said: “If organisations build and nurture key supplier relationships along the supply chain they will ultimately help their suppliers give them more for less. For many this will be a new skill and mindset. The future will be about co-operating and competing through shared supply, manufacturing capacity, and distribution and logistics.”

Commenting on the importance of supply chains in a downturn, Nigel Issa, Associate Partner at Atos Consulting, said: “As the downturn continues, supply chain vulnerability will be one of the highest risks organisations face. Although many leaders recognise the need to understand supply chain risks, few organisations have the capability to identify and manage them.”

Tim Lawrence, Leader of Supply Chain Services at PA Consulting, added:
“Customer driven supply chains have been found to deliver significant benefits for organisations, including inventory reductions of 15 per cent and a 60 per cent faster time-to-market. This makes this approach really relevant in today’s trading environment”

Other key findings from the MCA report are:

  • 94 per cent of businesses said that cutting supply chain costs, along with improving efficiency and productivity are their top priority
  • Over half of businesses expect their supply chain to become more complex in the future
  • 40 per cent of businesses view reducing their carbon footprint as less important than they did a year ago; almost 30 per cent have cut back on their investments in this area

For a copy of The Weakest Link?, please contact Hilary Downes at hilary.downes@mca.org.uk or tel: 020 7321 4810.


For more information, please contact:

Hilary Downes
Press Officer
Management Consultancies Association
Tel: 020 7321 4810 / Mobile: 07943 805594
Email: hilary.downes@mca.org.uk
David Pippett
DWP Public Relations
Tel: 01225 833745 / Mobile: 07899 798197
Email: david@dwppublicrelations.co.uk

About the Management Consultancies Association
The MCA was formed in 1956 to represent the consultancy industry to its clients, the media and government.  Management consultancy is an increasingly important industry for the UK economy with management consultancy revenues for 2007 estimated at around £8bn.  MCA members represent around 70% of the UK consulting sector, employ around 30,000 consultants and work with most of the FTSE100 and all government departments. Eight of the top ten UK-based consulting firms (by consulting fee income) are members.        

The MCA supports its member firms with a range of services including events, publications, interest groups and public relations. The Association also works with its members to attract the top talent into the industry. The MCA provides advice on the selection and use of management consultants and is the main source of data on the UK market.