Troubled Manufacturers and Suppliers Stick Together
Manufacturers are slightly more concerned about the effect of the recession on their suppliers than they are about themselves. A recent study revealed that while 61 percent of manufacturers report worry that their business will be severely hurt by the recession, 62 percent say the success of their suppliers is a significant concern also, according to the Economist Intelligence Unit's Manufacturer Confidence survey.
"We were surprised at the extent of their worry; we thought a greater concern for them would be access to capital or making sure raw materials could be accessed cheaply," says Iain Scott, senior editor at the Economist Intelligence Unit. "But they're very concerned about the impacts of the downturn on their suppliers, and nearly two-thirds report that the collapse of suppliers would have an immediate impact on their business and greatly affect procurement strategies."
According to Scott, that concern means manufacturers have to spend more time, more effort, and more money sourcing new suppliers and guaranteeing the resilience of their supply chains. But he adds that manufacturers have no plans to abandon struggling suppliers for more stable ones.
"It's easy to assume that [signs of trouble] won't improve relationships between manufacturers and suppliers, but in fact, the opposite might occur," says Scott. "One of the messages to take from this is that manufacturers might end up having very close relationships with suppliers in order to ensure the supply chain remains intact. And suppliers who are smart enough to keep up with manufacturers' own strategies could find that they're actually in a very good position to survive the downturn."
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