Caution urged on ditching suppliers

17 May 2000
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18 May 2000 | David Arminas

Companies must be careful of their reputation with suppliers when finishing partnerships or they could end up paying higher prices elsewhere, a consultant has warned.

Susan Scott, a former purchasing manager who now works at Harris Consulting, told the National Association of Purchasing Management's conference in New Orleans this month that firms could face unforeseen consequences if they did not tell suppliers that their services were no longer required until the last moment.

"The danger is that other contractors will start to wonder when you will sneak out on your relationship with them," said Scott.

"If the supplier community feels that you have treated a firm badly, the next time you choose a supplier it could put its prices up because you are seen as a higher-risk client. They are likely to be more cautious about commitment. I don't think that, as buyers, we are aware of this often enough," Scott told SM.

The decision to end a partnership is a business decision and by considering it this way, it can be thought of positively, Scott added. The experience with a discarded contractor could prove useful in the future and dealings should not become personal. "Most suppliers will recognise that if you maintain a professional note, you are doing your job," she said. "I think this aspect often gets lost."

She believed diplomacy was a vital skill in the purchaser's armoury. "We need be able to tell suppliers that our relationship is over, but also leave them feeling happy about it," she said. "We all talk about choosing a supplier, but never about how to end a relationship."

Leaving a partnership is always hard and can be ugly, said Lorrie Mitchell, supplier alignment leader at US company BellSouth Telecommunications. The process can also bring out insecurities in both parties, she said.

"It is necessary for both the supplier and client to understand that partnerships don't last forever because the nature of business is dynamic," Mitchell told delegates.

The purchasing function should not end a partnership without telling other departments about their concerns over a supplier, she added.

Mitchell stressed the value of a performance-based contract. "If a supplier is not willing to work with you on these measurements, or has no interest in introducing them, then you have a problem."

She underlined the importance of maintaining cordial relations with abandoned suppliers. "You never know which staff from a supplier will move to a company you are already dealing with."

SMmay2000

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