NAPM InfoEdge
October 1995, Vol. 1 No. 4

What To Do When A Supplier Is In Trouble


Table of Contents
  • Determining If a Supplier Is in Trouble Members Only Content
    In the best of all possible worlds, a supplier would never get into trouble. But in reality, at some point in your career you're probably going to have to deal with a supplier who needs help in some area, such as finances, quality, or delivery. Fortunately, the philosophy of supplier relations has evolved. Strategic alliances and partnerships based on trust have replaced the old, often adversarial, notion that the buyer and seller sit on two distinctly different sides of the fence. In this new arrangement of mutual benefit, you are in a position to assist meaningfully if and when a supplier does get into trouble.

  • Evaluating Your Options Members Only Content
    When a supplier gets into trouble, there are two very basic options to consider. One is to remain with and support your supplier, and the second is to switch to another supplier. Deciding whether to stay or go elsewhere may depend on your answer to this question: will your supplier's troubled situation affect the ability of your organization to fulfill its missions and objectives? If the answer is no, you may wish or be able to help your supplier out of difficulty. If the answer to this question is yes, then you may have to think seriously of going elsewhere. This decision is a crucial one, and one which cannot be made lightly, especially where partnerships are based on trust. While it's imperative to act quickly, purchasing's responsibility is to its employing organization to ensure product or service delivery and quality at the right price. You may choose to work with the troubled supplier, but, at the same time, you can't put your organization in jeopardy by hesitating to buy elsewhere.

  • Providing Help to Your Supplier Members Only Content
    When it comes time to take action, you must act quickly and decisively, without acting impulsively. As noted, the most fundamental decision to be made is whether or not to support the supplier who is in trouble or to go elsewhere. Where strategic alliances and partnerships are forged, it's in the best interests of both the supplier and purchasing organization to help the supplier in trouble, and to improve good performance to excellent performance, regardless of the level of importance to the purchaser. To this end, a reasonable amount of resources should be dedicated to improving poor performance quickly and sustainably. Remember also that flexibility, and perhaps special consideration, if warranted, could be extended to a poor performer in an area where the business need is not critical. Mostly, the option of switching to another supplier should be sought only when it is absolutely necessary.

  • Assessing Results and Determining Long-Term Strategies Members Only Content
    Eventually, the crisis will pass and you'll find yourself looking back on events. Now is the time to judge them clearly and without emotion. Such a review of the facts is essential to:


AUTHOR(S)

JOSEPH L. CAVINATO, Ph.D., C.P.M.
Joseph Cavinato is an associate professor of business logistics at The Pennsylvania State University, as well as director of procurement research for Penn State's Center for Logistics Research. He is active in NAPM, including service on the Academic Planning Committee and the Permanent Conference Committee. Professor Cavinato is a member of the American Society of Transportation and Logistics, the Council of Logistics Management, National Association of Accountants, American Society of Quality Control, and the American Production and Inventory Control Society. He has authored numerous books, articles, and other educational materials.

RON PAYNE
Ron Payne is a senior partner in Excel Partners, Inc., Harvard, Massachusetts, a management consulting firm specializing in transforming purchasing, materials management, and logistics processes. With over thirty years of experience in the field, he has presented papers, lectured, and traveled widely, particularly to discuss strategies and share developments and innovations in supplier management, both domestically and internationally. Mr. Payne has addressed NAPM, ADAPSO, and the National Minority Supplier Development Council (NMSDC, of which he is a past director) in general sessions. He is a member of NAPM; the Boston University School of Theology Board of Visitors; and the University of Texas at Austin, Engineering Foundation Advisory Council.



REFERENCES
  • NAPM Insights, May 1994, "Purchasing Planning for Disaster — Are You Prepared?"
  • NAPM Insights, February 1993, "When Disaster Strikes, Who 'Ya Gonna Call?"


FOR FURTHER READING
  • Booth, Simon. Crisis Management Strategy. Routledge, 1993.
  • Burt, David. Proactive Procurement. Prentice-Hall, 1984.
  • Kharbanda, Om Prakesh. Management Disasters and How to Prevent Them. Gower, 1986.
  • Leenders, Michiel R. Value Driven Purchasing. Irwin Professional Publishing, 1995.
  • Littlejohn, Robert. Crisis Management: A Team Approach. American Management Association, 1983.
  • Meyers, Kenneth. Total Contingency Planning for Disasters. John Wiley & Sons, 1993.
  • Mitroff, Ian. Crisis Management: A Diagnostic Guide. Jossey-Bass, 1993.
  • Moody, Patricia. Breakthrough Partnering. Omneo, 1993.
  • NAPM Insights, February 1993, "A Different Kind of Relationship."
  • NAPM Insights, March 1993, "An Action Plan for Creating Effective Teams."
  • NAPM Insights, May 1994, "Beyond Win-Win Negotiations to Partnership Development."
  • NAPM Insights, May 1995, "Developing a Supply Management Strategy."
  • NAPM Insights, September 1994, "How Teams Affect Your Suppliers."
  • NAPM Insights, September 1994, "Improving Your Supplier Relationships."
  • NAPM Insights, January 1993, "Strategic Partnering for Strategic Purchasing."
  • NAPM Insights, April 1994, "Strategic Purchasing: A History and Review of the Literature."
  • NAPM Insights, May 1995, "Supplier Development: Expectations vs. Results."
  • NAPM Insights, August 1994, "Supplier Management Teams."
  • NAPM Insights, March 1995, "Supplier Partnerships — the Dream and the Reality."
  • Silva, Michael. Overdrive: Managing in Crisis-filled Times. John Wiley & Sons, 1995.
  • Van Miegham, Timothy. Implementing Supplier Partnerships. Prentice-Hall, 1995.

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