It's a buyer's market

Buying in a soft economic environment
The global economic situation in 2008 presents many challenges but at the same time, it also creates opportunities for purchasing groups. According to many economists, the US economy is in a recession, causing ancillary effects throughout the global supply chain and resulting in a buyer's market in certain instances.

Purchasing strategies in a buyer's market are different from those of a seller's market, which has generally been the situation over the last five years. It is important for buyers to be aware of this change and seize the opportunities it offers.

The balance of power in a downturn shifts from sellers to buyers. Sellers become more aggressive in their terms and pricing since they desire to keep capacity utilised and maintain revenue streams. Buyers who understand this hunger can place more business up for bid, renegotiate contracts and seek out new suppliers. They should recognise that markets change over time and that they should ensure they do nothing which will damage their buying position when it becomes a seller's market again.

Globalising the supply chain
Firms have to recognize the value which globalising their supply chain brings in an economic slowdown. Despite reduced demand, they should continue to build relationships with suppliers in emerging markets such as Brazil, Russia, India, China, and Vietnam. Leading local suppliers in such countries will beef up export capabilities to become the global suppliers of tomorrow.

On the other hand, governments and public opinion have a tendency to bring into question the issue of sourcing from emerging markets due to the perceived negative impacts upon local markets.

Globalisation of procurement organizations
Those with operations around the world can further develop their global procurement functions during such times. They can continue to consolidate back office administrative operations into low cost countries as a means to boost cost savings and efficiencies.

Firms with growing presence in emerging markets are gradually seeing the benefit of locating strategic sourcing and procurement managers in these locations. The benefits are two-fold - getting closer to suppliers, and developing local procurement talent for use in their local and global operations.

Green supply chain
With a strong and growing focus on the environment, firms are turning to their supply chain to understand and improve their environmental performance.

Suppliers are being called upon to recommend product design changes to increase the energy efficiency of end products, as well as reduce the energy required to produce and distribute the items shipped to their clients. Underlying this effort is the need to spend time developing a consistent means to measure energy and material usage so that meaningful baselines can be developed with an eye towards improvements.

Supply chain security
Firms need to be resilient and agile, mitigate risks, and plan for a broader set of possible supply chain disruptions. The benefits are significant - improved efficiency, on-time deliveries, reduced inspections, and fulfillment of cycle times.

Realising that the integration of global supply chains is a reality, firms are taking a leadership position with governments and trade groups to move supply chain security to the next level by playing an active role in shaping security initiatives worldwide.

John Paterson is Vice President, Chief Procurement Officer, Asia Pacific, IBM. In August of 2006, Mr. Paterson relocated IBM's Procurement Headquarters and the CPO's office to Shenzhen, China, moving the procurement organization closer to the core of the technology supply chain.