Myth #8: Aggressively Managing Our Suppliers Is A Necessary Evil To Ensure Success – Part #1 (Lesson 24)

More and more, purchasing organisations are able to ‘self-serve’, during the initial research stages of the buying process. As a beneficial side effect of doing so, they now depend much less on having to play by the supplier’s rules.

As a result, clients are now much better placed to exert control over suppliers during contract and pricing negotiations. They also increasingly dictate the terms under which they will engage with suppliers. Suppliers that do not play by these new rules of the game risk being excluded from consideration during the buying process.

This is great for the buyer, who is in a position to control how the project is set up, preferably with a focus on achieving Guaranteed Project Outcomes^TM.

The situation should also be great for the supplier. After all, they are talking to an informed, sophisticated buyer who already ‘gets’ the need for their type of solution, and who is ready to buy.

So this should be a golden opportunity to acquire a new client.

However, from this stage, a project is often set on the path to failure as a result of what happens during the buying process, and the behaviours of those involved.

Short-term gain vs. value of long-term partnership

Any wounds inflicted during the negotiations and contract award process are likely to carry forward into the actual project engagement. This includes issues like:

Will the client show them ‘who is boss’ from the beginning?
Have they lined up an impressive procurement team to aggressively negotiate down on price?
Will they be open and communicative in terms of providing access to key business resources?
Or will they instead keep all their cards close to their chests, and keep any potential suppliers away from the business?

How the client engages with prospective suppliers during the buying process sets the tone for the entire engagement, throughout the project and beyond. For example:

If unrealistic expectations have been set, they are unlikely to be met.
If price has been aggressively stripped down too low, the supplier will be less likely to want to ‘go the extra mile’.
If insufficient information was provided, or access to key personnel was denied, the project will encounter ‘surprises’ that could have been avoided.
If the client has been difficult to work with, the supplier may be reluctant to do business with them again.

Broadly speaking, following the contract award, client/supplier relationship characteristics will fall into one of three potential categories:

An adversarial relationship (win/lose).
A cooperative, give-and-take relationship (win some/lose some).
A collaborative relationship (win/win).

How the client establishes outsourcing relationships will likely determine how the two parties approach each other during any subsequent conflict resolution.