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.