Swine Flu: Supplier Backlash?

Written by Adrian Davis

Everyone wants a deal in the short term. Hence, the rise of corporations like Wal-Mart and Costco, and the business model that squeezes suppliers in order to increase profitability. Eventually, squeezing suppliers comes back to bite us. We are currently facing the threat of a pandemic with the swine flu. Many of us are caught off guard and surprised. Yet, looking back, it was just a matter of time.

Poor facilities management in Mexican pig farms appears to be the cause of the H1N1 virus passing from pigs to humans. If we are unwilling to pay our supply chain properly, then they are going to take short cuts. The real price of cheap food is unsafe food and unsafe processes. Businesses that have to reduce prices in order to win contracts, turn around and hire cheaper labour and employ less rigourous and less expensive processes. We get cheap food in the short run but health risks in the long term.

Winds of Change

In a recent set of buyer interviews I did for one of my clients, I spoke to a senior executive of a crown corporation. He reports directly to the CEO and was hired to lead Strategic Sourcing for the specific purpose of changing this crown corporation’s practice of issuing RFPs and selecting the lowest bidder. He is reducing the number of suppliers his organization does business with. He is ensuring his suppliers are partners and that these partners make a substantial profit on his projects. Through painful experience, this organization has learned that when they nickel and dime their suppliers, their suppliers are not as committed to their projects. By ensuring their suppliers are actually making money, they are getting partners who are committed to their success. Finally, real leadership in the public sector!

We’ve built an economy based on taking advantage of others. Buyers try to take advantage of sellers; they seek the lowest price with no regard for the seller’s economics. On the other hand, sellers try to take advantage of buyers; they focus on developing “perceived value” rather than delivering real value. It’s every man for himself!

The Way Forward

In the end, what goes around, comes around. We need to stop the insanity. Let’s stop living in the space between supplier backlash and buyer’s revenge.

What to Do

As buyers:

* Let’s not look for the lowest price. Let’s look for the best solution.

* Let’s look for partners who can deliver real value and let’s allow them to be profitable.

* Let’s think long term rather than short term.

* Let’s think of mutual gain rather than our own gain exclusively.

* Let’s allow our suppliers to make money when working with us.

* Remember the old adage, “one good turn deserves another”. Let’s make it clear to our suppliers that we’ll honour their prices but we expect them to honour our expectations.

As sellers:

* Let’s focus on delivering real value to our customers who put their trust in us and let’s commit to helping them achieve their desired outcomes not just delivering a product or service.

* Let’s see our buyers as aspirants not just people who buy our stuff.

* Let’s ensure we understand the outcomes they are in search of.

* Let’s commit to helping them achieve their desired outcomes and let’s stay with them until they do.

This is the only way we will build a sustainable economy and a world that we’ll enjoy living in.

Adrian Davis -
	Adrian Davis is a business strategist and trusted advisor for chief executives and business owners. He has been studying sales methodology for over 25 years and is often referred to as The Sales Scientist. As President and CEO of management consulting firm Whetstone Inc., he has worked with organizations such as AOL, KPMG, Motorola, Dupont, Aviva, and PricewaterhouseCoopers. His highly talented team has developed a reputation for leading organizations to innovative and practical solutions that enhance customer value and dramatically increase sales and profitability. Read More >>
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