There can be no gains squeezing supply chain partners
March 29, 2020

In crisis times, businesses must re-negotiate on more equal terms

During these times of crisis, I remain concerned that certain people in businesses are deviating from ethical obligations. Suppliers are resorting to artificial price escalations, some traders hoard citing supply challenges, and even clients are gouging suppliers with unrealistic demands.

These are times for respect, transparency, and ethics to rule the relationships, not opportunistic postures. In this moment, people need to rise above the mine or yours mindset and stand together for mutual benefit. The principals, agents, clients, and their providers need to work together for a common goal to sustain themselves. Due to the ongoing crisis, companies are planning to take proactive steps, while some unfortunately resort to hurried approaches in the cover of exigency measures.

Equal relationships

Wisdom, however, requires introspection and planning. The fundamental rule is for calm and foresight when it comes to strategy and execution in such circumstances, for clients to expect tangible results. Especially on the cost front, they need to build alliances, not frontiers. Clients and principals must move away from outrageous demands on their supply chain to cut costs. Some of these approaches can break the spirit that is critical to any sustainable partnership. Suppliers also have to ensure its pricing is aligned with its contract deliverables and does not change citing unprecedented market conditions.

In the last few days, we have received many calls from some clients for arbitrary cost reductions. We cautiously attended to these dictates as we knew that these actions would pose a business continuity risk as well as impact employee morale and bottom-line. In spite of these being unilateral demands, we engaged the client to discuss the broader impact and to forge a mutually beneficial alliance.

These are times for respect, transparency, and ethics to rule the relationships, not opportunistic postures.

In such a situation, the spirit of partnership must bind both parties. It will be the mutual resolve of the two institutions and their perseverance that delivers results, not reading between the lines of contracts. Business requires cutting costs, and this can be best achieved only by time-tested solutions from existing supply chains. Clients have to leverage these proven suppliers instead of seeking new. There is a need to hold workshops, share data, experience, and assess risks with their supply chain partners to build mutually vetted models where risk is shared for a common cause. For instance, a key client with whom we have worked for years,approached us to cut the cost by a third.

Instead of frowning at them, we accepted it. After studying its business predicaments, we were able to offer a viable model with significant cost benefits. This was made possible only after a transparent exchange of cost elements, baselines, and benchmarks and based on a rationalization of cost assumptions.

Fairness and Realistic Expectations

This is an example of how a joint exercise where two teams deep-dived to agree on taking mutual responsibilities. In such situations putting demands or seeking undue concessions only compounds problems.

Any such client objective to achieve business prudence and viability must be based on fairness and realistic expectations, not demand thrust upon its partners.

This is the time for sensitivity and compassion too. All need to adhere to ethics that is necessary for both business and social good. Partnership in these times should aim to maintain a balancing act between realistic and do-ability than expect something impossible or utopian.

Source: Gulf News



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