By: Vel Dhinagaravel --
30 June, 2014
It seems like a distant memory, but the years ahead of the financial crisis that started in 200708 saw procurement predominantly focused on securing supply (at almost any price) as booming economies world-wide drove supply shortages. However for the last six years, by and large, procurement has been predominantly focused on cost cutting and has had to worry less about product availability. Availability could largely be taken for granted barring a few niche products and services.
However, it is worthwhile to remember that the pendulum keeps swinging from oversupply to under supply and never stays constant.
Over the last few years, demand had dropped significantly and is only now starting to approach pre-crisis levels. However, suppliers across industries have taken capacity offline either temporarily or permanently.
From my conversations with leading CPO's, I have started seeing them focus increasingly on availability (on top of cost). In fact, we have even started seeing the mining sector witness supply issues for key services. If mining industry -- which is the furthest away from consumer-driven demand growth -- is experiencing supply tightening, then it could mean that demand chain is tightening right from the consumer end.
Is the market pricing power going to shift back to suppliers? I believe that it is imperative for procurement teams across industry verticals to worry about availability if they have to avoid getting caught at the wrong end of the pendulum's swing.
Hence, the open question to all of you is: if the mining sector, which perhaps is furthest removed from the end consumer, is witnessing the rumblings of supply crunch, are you (based on where you are in the value chain) concerned about supply availability in the next 12-18 months? Share in your thoughts and views.