Bonus in the supply chain

THE formation of long-term relationships between companies and their suppliers has long been considered an ideal espoused only by management gurus. But there is growing evidence that business is embracing it as a vital factor in staying competitive, writes Roger Trapp.

Take-up by British organisations leapt 20 per cent last year, according to figures published earlier this month by Partnership Sourcing, the non-profit-making company set up by the Confederation of British Industry and the Department of Trade and Industry to increase awareness of the idea.

The fourth annual survey of UK companies by Partnership Sourcing shows that, for the first time, more than 90 per cent have heard of the concept and have at least a reasonable understanding of it. Purchasers' take-up during the year rose from 56 per cent to 74 per cent, while for suppliers the figure rose from 36 to 61 per cent.

More importantly, the survey of more than 300 companies, covering both manufacturing and services, suggests the approach has boosted performance.

Eighty-one per cent were able to improve the service they gave to customers, 85 per cent reduced costs, 78 per cent improved their product quality, and 67 per cent cut delivery times. Two-thirds also reported better communications.

Neill Irwin, a director of Partnership Sourcing, on secondment from the computer company ICL, said he was pleased by the take-up. Noting that interest had climbed steadily in past years, he said this year's sharp rise was a result of the momentum that builds in initiatives of this sort.

Leading companies, such as British Airways, John Laing, SmithKline Beecham and ICL, have representatives on a steering group that is supporting Partnership Sourcing. These and other enthusiasts had shown there was a better way, said Mr Irwin. But there were now large numbers of close followers.

'People are observant. They see it works and is better than driving a hard bargain and then calling the lawyers when it goes wrong,' he said. Also, there were 'equal benefits being obtained by businesses with turnovers from pounds 500,000 to more than pounds 500m and employee numbers from more than 10,000 to less than 100'.

The advantages being demonstrated by British companies were attracting the interest of organisations in other European Union countries. The concept is particularly appealing to businesses forming cross-border links and to information technology companies.

But, just as it had in Britain, interest was spreading beyond that. Companies are concentrating on key suppliers and customers and getting rid of those they do not trust.