Legal bluff threat to suppliers_2

28 February 2008

28 February 2008 | Paul Snell

A fifth of purchasers would threaten legal action against a supplier without planning to carry it through.

The results of the latest SM poll of 100 buyers revealed that 20 per cent of buyers had, or would make, such a threat and the remainder would not. It follows comments by a senior purchaser who argued that buyers must take suppliers to court every so often "to keep them on their toes".

"The threat of legal action can sometimes be a good way of getting a supplier's attention, but buyers should be careful about which suppliers they do this with as it can be harmful to a strategic relationship," said Natalie Bayliss, senior sourcing manager at Fujitsu.

Philip Dews, procurement manager at GAJ Construction, has threatened legal action before, but said it was a useful starting point for negotiation, as neither party wanted to end up in court. He added that taking suppliers to court was not an effective way of operating, because the cost of action often outweighed any potential benefit.

Some buyers said they would only do it as a last resort: "If you threaten a supplier in this manner then the whole relationship is beyond saving and you have to start looking elsewhere for suppliers," said Neil Dixon, procurement manager at Leaseplan.

And one purchaser admitted his firm had threatened to take their suppliers to court, but agreed it was "not ethical".

Most buyers were horrified by the idea of "crying wolf" with suppliers. "The adage about legal action is the same as the old clich, in the Wild West about handguns: 'Never threaten anyone with a gun, unless you're prepared to use it'," said one buyer.

"If you threaten someone with legal action but have no framework in place for following through with that threat if needed, the threat becomes useless."

Others described the tactic as "disgraceful" or "poor practice". "Organisations that resort to this philosophy are 50 years behind the times on current thinking, and it reflects either an incompetent management attitude or an organisation that treats its purchasing staff as useless clerks," said Alex Strange, a consultant.

Other respondents said court action showed a "lack of imagination" in resolving a dispute, and many cited the expensive and time-consuming nature of any potential action. "There are far more effective ways of keeping suppliers on their toes - performance management and relationship development to name but two," said consultant Graham Ockendon.

Some buyers claimed legal threats were a sign of a buyer already in a weak position with their suppliers.

Alexandra Underwood, solicitor at Field Fisher Waterhouse, said the possibility of mediation sometimes failed to be a strong enough warning for suppliers, but she added that idle threats were equally ineffective.

"We wouldn't advise a client to do it because there is a credibility issue, and credibility can become very important in a dispute. A better way would be to say you will 'consider' legal proceedings. It raises the spectre if you say you are 'considering' referring it to a legal team," she said.

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