Procurement teams have long managed inventory risk through delivery schedules, buffer stock policies, and volume forecasts. But as demand softens and suppliers face rising capital costs, suppliers carrying surplus inventory are looking for ways to push that risk downstream. Whether through aggressive volume commitments, early delivery requests, or take-or-pay clauses, the burden of supplier stockpiling is increasingly landing on buyers.
Upstream Stockpiling Becomes a Downstream Problem
With financing costs elevated and customer pipelines less predictable, suppliers, particularly in packaging, components, and industrial parts, are building inventory buffers to avoid capacity underutilization. The challenge for procurement teams is that these buffers are often misaligned with actual demand signals.
In industries like consumer electronics and FMCG, procurement teams report growing pressure from suppliers to accept early deliveries or raise purchase commitments, often citing outdated blanket purchase orders or long-lead production assumptions.
Reasserting Control Over Delivery and Volume Terms
Companies are responding by tightening commercial governance around volume commitments and delivery timing. Where take-or-pay structures were once common for securing supply in tight markets, buyers are now renegotiating these terms to include flexible drawdown clauses or dynamic demand triggers.
In parallel, forward-looking companies are beginning to monitor supplier-side inventory levels as part of their risk programs. By embedding upstream inventory visibility into SRM systems, procurement teams can detect early signs of overproduction, long before a supplier attempts to offload surplus stock. Some firms are even piloting shared forecast platforms where buyers and suppliers co-manage production pacing in response to real-time demand signals.
Rebuilding Procurement Agility
Inventory Visibility Beyond Your Walls: Procurement teams should expand their visibility upstream by requiring periodic inventory disclosures from key suppliers, particularly in high-volume or high-volatility categories. This enables early intervention when supplier inventory levels outpace actual order flows.
Volume Flexibility Clauses: Contract terms should be updated to allow for volume modulation based on real demand—such as shifting delivery windows, capping overproduction buffers, or introducing shared forecasting accountability between procurement and supplier sales teams.
Dispute Pathways for Unscheduled Deliveries: Establish clear escalation paths for rejecting or deferring deliveries not aligned with confirmed schedules. Internal alignment with finance and warehousing teams is key to preventing silent acceptance of unapproved volume shifts.
Cash and Working Capital Controls: Over-ordering driven by supplier pressure can erode procurement’s working capital performance. Procurement should link order decisions more tightly to inventory turn metrics, cash conversion cycles, and end-customer consumption.
Supplier Engagement on Capacity Planning: Encourage transparent conversations with suppliers around their production planning models. Where needed, offer joint scenario planning or temporary schedule smoothing support—but only with mutually agreed triggers.
From Supplier Push to Buyer Discipline
In an environment of muted demand and tighter financing, suppliers may seek to protect their own metrics by shifting inventory exposure onto customers. But procurement’s job is not to absorb that risk by default, it’s to push back with structured data, tighter contracts, and real-time insight. The goal isn’t confrontation, but clarity. The most effective procurement teams will not only detect supplier-side inventory risk before it hits their books, they’ll use it as a catalyst to build smarter, more balanced commercial relationships.
