All professionals of sourcing had once the feeling to sign a very advantageous agreement for their companies but at the same time somewhat abusive for their suppliers. In those cases, the emotion and a certain feeling of powership can seize them during a few days after signature.
However, little by little they realize that the service level offered by their providers is being degraded without any manifest explanation.
Fourteen years ago while working for a large global air gases manufacturing company, I was driving a tough negotiation tender with the 5 biggest European suppliers of carbon steel bottles for compressed gases. I remember we managed to reduce from 150€ to 80€ the unit price of each 50 liters gas bottle. After contract signature, the situation was clearly quite advantageous for us but obviously not affordable for those 5 suppliers.
What happened next? … 6 months later the weakest supplier of those 5 could not maintain its production costs structure and went bankrupt, stopping immediately its production units for carbon steel bottles. That new situation with only 4 actors in the market reversed completely the scenario. While demands kelp going rising, supply sources were reduced in such a way that prices irremediably began to rise until being placed at levels of 250€ per unit proving that a win-no win situation could quickly lead to a no win-win case.
We bloody learned the lesson. There is no better advice than being fair with those partners who could provide you future benefits.
Andres Jordan
Director of Operations
