“Crisis”! “How can I cut costs?” “What to eliminate?” “Who can I give up?” “Who shall I fire?” All these questions have already tormented and have been concerning the economic rationale of many multinational corporations, local companies or small entrepreneurial firms over the last year! I must admit, however, that I have not heard lately questions like, “Who can I associate with in order to maintaining the value proposition for my clients?” “Is there a present opportunity I have not thought of?” And even less have I noticed any significant concern of companies for the sustainable development of other industries that are part of their value chain.
Unfortunately, the economic reality we live in shows that in an exclusively mercantile world, where profits, profitability, turnover and market share, the circulating capital available remain the magic words that guide the way of any society, trade seems to be done on a single fundamental: “The business of the business is to make business!”
I dare to provoke those who are currently working in areas of activity, mainly operational, non-productive (purchasing, logistics – storage, distribution, etc.) but also any other nostalgic people who still believe in an open, future-oriented society, to join me in demonstrating that it can be otherwise – “The business of the business is to make business and help other to do so … “.
Experience in recent years has shown me, for example, that in the field of any kind of purchases (raw materials, materials, services) that a company needs, it is recommended to look at what you “leave behind” or what “road ahead you open”, after a negotiation with your business partner. It is most likely that the lowest price, the best payment term not to be endlessly sustainable. So what?, skeptics would say. I recently attended a conference in the field of Supply Chain and we bitterly confirmed with the participants the thinking according to which “there are suppliers”!
Yes, there are suppliers and there will always be. The question is: are those needed?, are those with potential?, are those that we need?, those who, in turn, will create value for others, jobs for others, those who can be drawn with confidence in joint research and development projects with yours? Or there will be only those who can offer you “the best value for money “- already the dedicated formula for business relations in crisis, in which we could honestly admit that price dominates everything!
Maybe a few of you know that in the world:
1. Every minute a new supplier starts his activity.
2. Every 4 hours shareholders of a supplier change.
3. Every 8 minutes a supplier goes bankrupt.
4. Every 3 minutes a vendor sells his operations.
5. Every 14 seconds a provider is sued.
6. Every 2 minutes a vendor’s name changes.
7. Every minute the risk profile of a provider changes.
* source: Dun and Bradstreet (US – Credit information & Credit reports)
Nor that perhaps within the first 6 months of 2009, in Romania, a number of over 5,000 local suppliers of construction, transport, services of other undertakings were bankrupt. Were they involved in a mad spiral of cost reductions and deadlines for payments required by customers, or did they skid on the relationships indifference slide not long ago profitable, indifference that bears one single label for clients, “there are other providers”?!
This article does not want to be a manifesto for tolerance, nor does it extend in a long string of actions CSR type, by which I want to convince you of the usefulness to find out how we can help the industry we are part of. It is supposed to be a wake-up call for negligence, or rather, for the ease with which we sometimes push our partners to bankruptcy, hiding ourselves behind some “crisis reality”. The crisis means steady rise of delays in payment to suppliers (90-120 days), extension of financial jam, insolvency of a growing number of companies, the “domino effect” on the supply chain , incapacity of payment due to claims from our own clients, applications for insolvency filed by small companies, dependent on a single-client relationship …
We had the arrogance to subdue a group of colleagues and friends, members of multinational corporations or local firms, to a “brain training” test, asking them what they think to be a “strategic partnership with a supplier” and “if it’s more important to have strategic partnerships with suppliers or with customers”? Only 2 people out of 50 have confirmed that there is still hope, that there is still the concept of strategic partnership, as a long term relationship, based on bilateral development and the division of risks and benefits, even now, during the crisis!
We learned from these people that during the crisis their companies are thinking about cutting costs, by creating a sustainable competitive advantage and not just by suffocating a business partner with favorable payment terms and price.
Here are 3 of the possible alternatives to the classical alternatives by which they exploit the power of buyers at the expense of your business partners.
Improving the technical specification – by underlying parts, examining the life cycle of the product
• Integrated logistics, service provider support for improving their processes and the development of common projects for change (innovation, patents-exclusive licence)
• Restructuring the customer-supplier relationship – analysis of the main competences of each party in relationship, vertical integration, creating alliances and help new suppliers to enter the market and to develop.
And yet, why do we bother so much, if “there are vendors”? Simply because we can control what will exist in the market and we will not be exposed to what “remained”. And especially because we help create a solid industry stimulating sustainable and healthy competition, and not absurd price game. And if I may, because WE MUST BE RESPONSIBLE FOR OUR BUSINESS in the FIRST PLACE and the BUSINESS COMMUNITY which WE BELONG in the SECOND place!
And, not least, because such an approach does not hurt.
There are already great examples of CSR initiatives, transformed into strategic partnerships with suppliers. Large companies such as HP, L’Oreal, Volkswagen have managed through their actions to increase awareness of the importance of partnerships and innovative solutions, to have common development goals with their suppliers and to help industries to whom they belong through incentive and increase potential suppliers programs.
And if they could and wanted and are the first in their industries in terms of turnovers, profitability and costs, it means there are other solutions than defensive acquisition! We just need to realize the benefits of these actions as well as the risks of current approach!