Buyers & Suppliers - Time for redefined win:win practices
I just read Justin’s blog on “hammering suppliers on price”; Prof. Rob has a very valid advice for companies on early warning signs of danger from suppliers.
Hammering suppliers on price and payment terms “now” vs. “long” term relationship, is a very important aspect in risk management. When there is a financial crunch in the buying organization, their sales are hit and their bottom-line is impacted.... suppliers, as partners or extended community to their organization, are expected and should also be a part of this tough journey. (Hopefully, this is only for few more months) So "renegotiating price" and change in the DPO with the business partners are inevitable. But to what extend?
Hammering suppliers on price, exploiting smaller firms and abusing buying power on smaller businesses is too harsh. Open, transparent and honest discussions can help both buyer and supplier community in difficult times. This will pave ways to new innovation - Collaborate to innovate. Both the organizations should collaborate and align to a new win-win situation. For me, renegotiation will for sure, push the suppliers and buyer to think out of the box. Renegotiating may not be a success always, but if there is something, why not dig that out. An extensive ground work needs to be done before we step on the gas. This should not be tried with all suppliers (buy-in from all the key stakeholders is a must), because this might kill the relationship.
One small example of redefined win-win: why cannot both the organizations implement a tiered payment term? PO to suppliers would say, net 105 days or 2% discount - 70 days or 5% - 45 days. Now if my supplier is in real need of cash to run his business, they should be allowed to choose an option from the above example in his invoice and the buying organization should respect that. This is one way of managing this crisis.”If we believe a rebound will happen, then let’s share the burden till then."