PurchTips edition #402

Last week, the United States government released a shocking statistic:  the US unemployment rate had dropped to 3.8%.  The rate had only reached this low of a level in one prior month since the 1960’s!  Other countries throughout our global economy are seeing similarly high employment levels.

For the general population, this is good news.  It means that jobs are available and pay rates are relatively high.

For procurement professionals, this is bad news.  It means that suppliers are likely to have trouble finding workers to continue to fulfill your orders.  In fact, this is a potential crisis.

Procurement professionals like you need to be more vigilant than ever when sourcing.  You need to probe specifically how your suppliers are handling the challenges of this hot economy and how well-prepared they are if it gets hotter.  Here are some questions you can ask your suppliers:

• What percentage of your full-time equivalent positions are currently open?
• How does this percentage compare with a year ago? Two years ago?
• Statistically, how is the tight labor market impacting your lead times and on-time delivery percentages?
• What are you doing to retain employees?
• What methods are you using to attract new employees?
• What are you doing to prepare for an even tighter labor market in the coming year?

There are really no right or wrong answers.  But comparing answers of competing suppliers will reveal which suppliers are managing today’s economic challenges and which are more likely to crack under the pressure of a tight employment market.

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