MAP, vendors and economic slowdown (part one)
by Miki SaxonAll the talk of an economic slowdown reminded me of an article written by Al Negrin for RampUp Solutions‘ newsletter the last time this happened. It’s excellent information and worth republishing, so here is the first of two parts.
Vendor Retention in a Downturn
One of the significant advances in modern business practice has been “partnership procurement.” Instead of the style of the fifties, sixties, and seventies, where vendors were treated as indistinguishably as if they all sold so many sacks of potatoes, partnership procurement tries to foster a symbiotic relationship between customer and vendor. “Just in time” delivery schedules, cooperative design efforts, and on-site vendor quality assurance are just some of the manifestations of partnership procurement which have improved quality and cut procurement costs over the last ten years.
Partnership procurement takes as its basic premise that bringing a vendor into a customer’s manufacturing processes and keeping the vendor well informed as to how his products are being utilized will improve efficiency of both vendor and customer. The success of partnership procurement has validated the correctness of this basic premise.
Most of the period during which partnership procurement has flourished has been one of prosperity, strong economic growth, and good profits. Partnership procurement in this country has not had to suffer through hard times such as high tech industries are now facing. Yet, just because times are difficult is no reason to suspect that partnership procurement would be any less effective.
However, many companies are starting to act as if a fundamental change needs to take place in customer-vendor relationships, and vendors suddenly need to be treated according to the mushroom theory of management: “Keep them in the dark, heap fertilizer on them, and cut off their heads when they stick out above the ground.”
Just because a company is starting to experience hard times is no reason to communicate less effectively to vendors. Yet, suddenly many vendors aren’t being given timely information about postponements and reallocations of purchases, aren’t being involved in cost-saving design changes and, worst of all, aren’t being paid on time. When frantic vendors call, they are either told “she’s in a meeting and will call back later” (which doesn’t happen) or are diverted to subordinates, who “can’t approve these invoices.” Suddenly, the once active lines of communication go dark.
(Continued tomorrow)
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January 21st, 2008 at 12:50 pm
Miki- it’s fascinating to observe what “hard times” does to relationships, from marraige to business partnerships. The JIT relationships are often formed based on who is in the power seat vs. “how can we best work together”. The lean culture approach, done properly, focuses on a relationship in order to best communicate issues and challenges between “partners” whether it be two manufacturing depts feeding each other or a supplier providing raw materials to a manufacturer. This approach usually finds innovative approaches to solving problems in “hard times” vs. abusing the power. One of the most telling periods of time was the tech boom, followed by bust of the late 90s into 2001. Many industries were very excited by setting up industry “marketplaces” where supposedly thankful suppliers were supposed to flock for business. The problem was that those suppliers knew they would be squeezed by most of the customers/companies in that marketplace and avoided it. Most of the promise of marketplaces failed miserably and a lot of money was wasted on setting up the technology- basically because of poor relationships.
January 21st, 2008 at 1:01 pm
Bob, I remember those sites, but do you think that any website can take the place of a person-to-person relationship, whether handled in-person, by phone or on the net?
January 21st, 2008 at 1:26 pm
No- to be successful they must be preceded by a good relationship.
January 21st, 2008 at 2:16 pm
Yes, and ‘relationship’ doesn’t mean being listed as a ‘friend’ in Facebook or MySpace:)