fbpx Skip to main content
search
AOP BlogRisk ManagementSourcing & ContractingSupplier Management

Is there such a thing as too much leverage?

By December 6, 2022April 9th, 2024No Comments

A couple of weeks ago, Philip Ideson posted a LinkedIn snap poll about procurement’s negotiating leverage. He asked whether it is possible for procurement to have so much leverage over a supplier that they ‘force’ them to agree to a price or set of terms that is unsustainable?

You can hear what Philip and I thought about the poll results and the comments we received in this week’s podcast, and there were good arguments made on both sides.

Here are a few examples of what we talked about and what we heard from you.

In favor of protecting suppliers, the winning group in the poll, were reasons like:

  • Preserving competitive alternatives in the market, as opposed to over concentrating volume with just a few very large suppliers
  • Forcing suppliers into an unprofitable situation just sets the stage for a friction-filled contract term
  • It does procurement no good if they negotiate extremely competitive prices with a supplier that then goes out of business
  • The potential brand damage associated with negative press about how procurement’s company manages their supply relationships

On the other hand, people pointed out that:

  • It is challenging for procurement to know when suppliers are actually on the brink of losing money and when they are just working to conceal their costs and overheads
  • Suppliers probably don’t have any qualms about allowing procurement to overpay when the shoe is on the other foot
  • Suppliers have a responsibility to walk away if a deal is not in the best interests of their company

What is your opinion? Have you found yourself in this position? Click here to join the discussion on LinkedIn.

Close Menu