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Inside Supply Management Magazine Masthead

Columns

Shopping Around

Author(s):

Gary D. Drayer, MBA, C.P.M., A.P.P., CPIM
Gary D. Drayer, MBA, C.P.M., A.P.P., CPIM, is director of materials, Anixter Fasteners, Allentown, Pennsylvania.

March 2006, Inside Supply Management® Vol. 17, No. 3, page 44

What if your company asked you to evaluate a potential new business partner and you uncovered some less-than-desirable findings?


You oversee supply management for a large, multinational manufacturing enterprise whose long-term business strategy is to grow through acquisition. Currently, your company is very excited about the chance to purchase a smaller firm that manufactures related parts — in fact, the same type of items that you've had to source in the past. The plan would be for the smaller company to become a subsidiary. However, on a previous occasion, you yourself assessed this firm as a potential supplier and declined to do business with them because of some questionable business practices. How do you communicate your negative opinions about this company to your executive team?

When it comes to issues related to questionable business practices, it's important to stick to documented or known facts rather than throwing in a great deal of hearsay or conjecture, or even your own opinion.

Set the stage by establishing your own credibility based on your past experience with this supplier. Run through the analysis you made previously and revisit what facts led you to make the decision to pass on the company at that time.

A SWOT analysis may be basic, but it should be at the heart of your presentation to help you quickly boil down the facts. One strength that your analysis may reveal is that the smaller company might benefit greatly from your larger company's leadership — everyone expects change after an acquisition, and this could be a fresh start for them, and you. On the other hand, their weaknesses may be substantial: Your company's reputation could suffer, and accounting, audit and liability issues could arise.

If you're not able to provide factual documentation, and think that your claims of questionable business practices may be viewed as unfounded, then make sure to emphasize any other solid reasons that you decided not to buy from this company, and simply mention that you've heard of some questionable business practices that your management team should look into before finalizing their own decision.

Ultimately, though, it's their decision, not yours. Give them all of the available factual information and then let them decide whether to accept or reject the acquisition. If they decide to make the acquisition after you have shared all pertinent information, you'll have to accept the outcome and work hard to make it successful. It is always possible that you were missing some vital details that would have slanted your decision in the opposite direction.


To contact the author, please send an e-mail to author@ism.ws.


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