19 November 2009 | Allie Anderson
Issuing key suppliers with ultimatums is counterproductive and could damage long-term relationships, buyers warn.
The message comes after Ryanair chief executive Michael O'Leary threatened to dump vendor Boeing if it fails to cut costs on an order of 200 aircraft by the end of the year (Web news, 2 November).
Mike Attwood, purchasing director at sandwich chain Subway's buying arm, the European Independent Purchasing Company, said understanding a supplier's pricing structure is the best way to secure savings. "You need to delve into why a price is what it is and break apart the cost of the components. You won't do that by beating suppliers over the head."
Costs have to be sustainable for both parties, added Stewart Jackson, supply chain director at Continental Tyre Group. "If it doesn't work for one side, it won't work for either. If you get the partnership right, there's always a better way."
Other buyers said ultimatums would make suppliers question whether they wanted to work for an organisation that dishes out threats. Frustration and resentment could potentially make ongoing relationships untenable, some added.