Changing Dynamics in Supplier-Buyer Relationships as Pandemic Pressures Subside

Big retailers are looking to reassert leverage in supply chains to rein in costs

Walmart told its suppliers it would push back against efforts to raise prices

Shifting Commercial Relationships

The commercial relationships between retailers and their suppliers, which shifted as a result of the COVID-19 pandemic, are undergoing a second transformation as businesses contend with ongoing changes in consumer spending and high costs throughout their supply chains.

Pressures on Suppliers

Large companies, including Walmart Inc. and Whole Foods Market, are pressing suppliers to cut prices for goods, while others have been canceling orders for products ranging from clothing to appliances. That is a stark change from buying strategies as recently as a year ago, when companies were looking to rush in merchandise to restock depleted store shelves.

Retailers Regain Control

Now that shortages have generally subsided and supplier-buyer dynamics have returned to pre-pandemic norms, logistics experts say retailers are attempting to use their size and purchasing power to gain greater control of their supply chains.

Ordering Pandemic Impact

Last year, many retailers placed large orders early and rushed goods around transportation bottlenecks to ensure they had sufficient inventory for the fall, when consumer spending typically increases in preparation for the winter holidays. As Americans shifted their spending to services rather than goods, many retailers were left with excess inventory and too many incorrect items in the incorrect locations.

Adjusting to Decreased Demand

Now, many retailers are more careful when placing orders to prevent overstocking. In addition to dealing with the effects of inflation on their own operations, this has caused suppliers to scramble to adjust to decreased demand and requests for lower prices.

Inflation Impact on Pricing

This year, some retailers have requested cost reductions from their suppliers in an effort to lower customer prices in the face of high inflation, which has begun to slow consumer spending. As a justification for price reductions, the companies cite falling transportation costs and commodity costs.

Supplier-Retailer Tensions

In some instances, the shifts are increasing tensions in supply chains as suppliers seek to recoup high raw material costs and retailers attempt to prevent higher prices at the checkout counter, which could dampen consumer demand.

Maintaining Collaboration

After disruptions during the pandemic highlighted the fragile nature of supply chains and the need to manage supply chain risks over the long term, some companies are attempting to maintain a spirit of collaboration, according to Mr. Handfield of North Carolina State University.

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