Supply Chain Report 2023

or never evaluated or shared proportionally before the contract starts up. Some Tier 2 organisations have proposed their own commercial models that better balance the relationship, but their pleas have seldom been heard. Tier 2/SME organisations may walk away from contracts if they feel the rewards do not offset the risks of failing to meet the requested targets. The survey also showed, for the first time, that risk reduction was ranked higher

(when considering commercial contractual agreements) than cost reduction. Over 70% of the responses cited lower risk while 59% picked cost reduction as a 'top three' priority when considering commercial contractual agreements. A focus on cost reductionwithout considering the full value proposition of a commercial proposal can deprive the supply chain of the healthy margins it needs to invest and offer more innovative solutions.

Figure 1b: Tier 1

50%

45%

40%

35%

30%

25%

20%

15%

10%

5%

0%

Yes sometimes Yes all the time

Rarely

Don't know

Never

Figure 1c: Tier 2/SME

50%

45%

40%

35%

30%

25%

20%

15%

10%

5%

0%

Yes sometimes Yes all the time

Rarely

Don't know

Never

SUPPLY CHAIN REPORT 2023

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