Changing Supplier Buyer Relationship in the Industry

In any business, it is of prime most importance, to understand the ‘relationship’ among all the entities-be it the human capital or machinery-involved in a business cycle. Because of the constant interaction between these entities and business players, a business is profited and hence grows substantially. But in the past few decades, there’s been a drastic change in the way business is done. And, in this blog, we shall focus on changing supplier-buyer relationship.

“Suppliers and especially manufacturers have market power because they have information about a product or a service that the customer does not and cannot have, and does not need if he can trust the brand. This explains the profitability of brands.”

–Peter Drucker

Among all the other constraints, any business is majorly affected by the behaviour, understanding, and compatibility between a supplier and buyer. They, buyers and suppliers, can take different forms and names. Broadly speaking, there are three kinds of relationship between a supplier and buyer namely, transactional, collaborative, and alliance. Such a division is formed based on the amount of business done and the extent of accountability of both the parties; the onus of the word ‘partnership,’ what it means to both the parties doing business.

Supplier Buyer Relationship: THEN

Since the beginning of the Oil & Gas industry, it has been affected & marred by lower connectivity. And in the 1990s, when the early entrants in the field, business giants- as we know them now-dominated the sphere of business and an almost monopolistic market was present back then. There were business players other than these giants but they remained aloof from a profitable business and connect with the right buyer or supplier because of the prime reason that the industry began with a close-knit circle, which has remained unchanged since then.

A few suppliers knew a few but targeted, buyers. In this way, the market progressed one dimensionally not holistically. And most of the businesses & transactions which happened had a huge influence of the service providers and/or the middlemen in closing the deals. In this way, we can say that previously the relationship was transactional in nature than collaborative.

Supplier Buyer Relationship: NOW

Now the scenario has completely changed. It’s almost a 360-degree flip. Earlier, the image and reputation of the Oil & Gas industry were that of an industry relying on tangible assets. But currently, it is a combination of assets both tangible and intangible. Intangible assets like the reputation of the company and the intellectual property at its disposal in terms of innovative initiatives and patents in its name. Such a package can be called the ‘dynamic capabilities’ of the company. These dynamic capabilities and the ever-changing technologies are also playing its due share of role in the relationship between the buyer & supplier.

For instance, the petroleum industry is facing a mammoth challenge of intensifying demands for delivery of shareholder value and increased outputs. All this is happening under the light of increasing global demand for hydrocarbons. Such a demand has a direct and serious effect on the relationship between the supplier and buyer in any industry and specifically the Oil & gas industry.

It has also been recently affirmed and substantiated by a research that the communication patterns between the supplier and buyer need to be of good quality and need to be effective in order to optimize the profit in order to successfully work together.

Service providers’ involvement in the ambiguous decision making

One of the ways of optimizing the profits is clear and concrete communication. And here enters the service provider who assumes the position of a conduit of communication between the buyer and supplier. There’s a reason why it is often declared that service providers’ involvement often leads to ambiguous decisions being made, and that is that the buyer-supplier as an entity relies on the data provided by them [service provider/middlemen]. If the data is faltered, or say probably based on wrong assumptions the relationship is bound to be affected. It [communication] forms the basis of the shared attitude between buyer and supplier.

A last remark: the ever-changing relationship between the two

It is undeniable how technology has affected any market, especially the Oil & Gas industry. And it is even interesting to note that an apprehensive industry like O&G is moving towards digitization, it is chiefly due to the advantages and ease of doing business which the digital technology has to offer. Now, suppliers and buyers do not need to wait for meeting at an industry-fair or to organize a meet through a middleman. This can happen over Skype or through any of the social media platforms.

It is observed how severely supply chain is affected due to the following factors: Marketplace is becoming more complex; greater price transparency; and the dwindling ‘shared attitude’ of business players. This lean supply chain and shaking trust can be mended a lot by the incorporation & involvement of online companies. This is the possible changing link of the relationship between the buyer-supplier as of now, in the contemporary marketplace.

Read our blog, the ‘right marketing’ which is the need of the hour of the Oil and Gas industry

Nowadays, procurement and business deals as JVs can be initiated online and with ease. Procurement through various online portals has had a major impact on the way business & transactions are done. The whole processes which were time-consuming required vigilance and follow up has been eased a lot through online tracking of procurement. Tendering and other auctions have been made online; a different level of transparency has been achieved altogether making it a cherishable experience for all the stakeholders.  Thus, in this manner innovative & transparent technologies have changed the relationship between the buyer and supplier and subsequently had a paradigm-shifting impact on the way business is done in the Oil & Gas industry. And in this evolutionary line of changes which are shaping the oil and gas industry, Energy Dais is a platform where you can find the best supplier and buyer of the products your company deals in.