Monday, 19 May 2014

A Mars a day doesn't help procurement pay.

Today we have heard that Mars UK have revised their terms of doing business and expect suppliers to wait 120 days (as opposed to the previous 60 days) for payment. Alternatively, it is reported, suppliers can access supply chain finance, for a reduced payment in 10 days.

Only last week I discussed the issue of late payment and I have to admit I am surprised it is a symptom of the economic recovery as opposed to the recession. Nevertheless, it can be assumed Mars UK have a strategy behind this new policy which suppliers, in turn will have to decide on their response. Now there is a danger that others will feel this is the way forward and something to be copied - so a few thoughts:

  1. How dependent are you on your suppliers? If you need your suppliers more than they need you they may chose to say "no thanks";
  2. How easy is it for you suppliers to find alternative customers? If it is easy for suppliers to find alternative customers they may just opt to give those customers preference over you;
  3. How competitive are your competitors? If your competitors are also using the same suppliers don't be surprised that they offer your suppliers more attractive terms to suck out your supply source?
  4. Have you existing contracts in place which state the existing terms? Don't be surprised if suppliers decide to enforce those terms unless you give them something in return, for example a longer term commitment;
  5. What will you do if suppliers just say "okay, but in that case the price is higher and lead time longer"?
  6. Have you thought what you will do if the suppliers just say 'no' - how will you mitigate against that risk?

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