The Great Lockdown: Will You Keep Bullying or Help Your Suppliers?

Over the past few years, I’ve written a lot about supplier relationship management. Most of my posts have focused on how many companies (particularly the “800-lb Gorillas” in each industry) still bully their suppliers, shifting as much risk and cost onto them as possible.

This past January, for example, based on an article published in the Wall Street Journal, I wrote about how “Apple [is] Still ‘Old School’ in Procurement and Supplier Relationship Management.” Here are some other examples:

Now here we are in the “Great Lockdown,” the worst economic downturn since the Great Depression due to the COVID-19 pandemic. Many companies, across virtually all industries and geographies, are struggling financially. What do you do now? Is it time for every company to fend for itself or is it time to apply the “We’re in this together” mantra to how you work with your suppliers and other trading partners? 

In a Harvard Business Review post published yesterday titled “It’s Up To Manufacturers to Keep Their Suppliers Afloat,” Tom Linton and Bindiya Vakil write:

Supply chains are interdependent ecosystems. Thousands of small suppliers feed mid-sized suppliers, which, in turn, feed large global corporations. The current crisis is a dire threat to these ecosystems. Large global corporations should act now to prevent them from collapsing. Their own long-term success — and perhaps even their own survival — is also at stake.

I encourage you to read the post for some best practices the authors share on what steps to take now. They speak from experience, as this excerpt explains:

While this pandemic is unprecedented, this kind of emergency supply chain financing is not. During the 2008-2009 financial crisis, companies such as LG, where one of us (Tom Linton) worked, and Cisco, whether the other (Bindiya Vakil) was employed, used loans, advance purchases, and other measures to keep imperiled suppliers afloat. Because the two firms stood by their key suppliers during their darkest hour, the suppliers paid them back with immeasurable loyalty and rewarded them in many ways during the recovery, such as giving them preferential treatment to meet their needs, notifying them early about looming supply issues, and offering them bigger discounts.

Are you actively assessing the financial health of your suppliers, including Tier 2/3 suppliers and those privately held? Do you know which suppliers have the greatest financial impact on your revenues and profitability? Are you taking actions to help your suppliers or are you still carrying a big stick?