Suppliers may 'bite you on the backside'

2 August 2009

03 August 2009 | Jake Kanter

Treating suppliers badly during the recession could "bite you on the backside" when the economy improves, according to participants of an SM/Office Depot roundtable last month.

Mathew Harrowing, director at e-procurement firm Etesius said if suppliers are "kicked around all over the place" to get prices down, they are likely put costs back up at a premium coming out of recession.

He added vendors could also table "take it or leave it" ultimatums, which would put buyers with critical or unique vendors in a difficult position.

"The rules of the game shouldn't fundamentally change if we are in a recession. There should be an intelligent approach, not one of 'we are just going to go out there with a big stick and beat everybody', because that just doesn't work," Harrowing said.

Richard Alderton, head of purchasing and logistics at dairy equipment firm DeLaval, said the company provides a large portion of some of its suppliers' revenue and bad treatment could result in them going out of business. "One thing that keeps me awake at night is our suppliers' cash flow," he explained. "The last thing I am going to do is increase my payment terms."

Westminster City Council has introduced seven-day payment terms for small vendors to help keep them in business and support the economy, said head of procurement David Loseby. "It is almost counterintuitive behaviour, but when you look at it, it is the right thing to do."

David Harrison, director of purchasing at pharmaceutical firm UCB Celltech added: "Forget squeezing on payment terms and other defensive practices, let's look at how we can use these fallow times to really drive improvement in the supply chain."

SMaug2009

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