Supplier relationships in tough times

Difficult times shine an intensive spotlight on supplier relationships, exposing both their strengths and weaknesses. It’s a time when businesses find out just how much they need each other.

The collapse of well-known businesses over the last three years has undoubtedly had an effect on suppliers and their relationships. Smaller firms concerns of losing large orders due to weak retail figures have been warranted again by the news that retail sales dropped sharply last month.

Two recent examples in the retail sector show the very different sides of supplier relations:

• HMV

After troubling sales results, HMV used the positive relationship with supplier to trade a small equity share with them for vital “breathing space”. HMV Chief Executive Simon Fox said the move helped them “Off the sick list.”

• GAME

Game, meanwhile, asked suppliers to accept not as good payment terms to help ease its financial woes, some of its larger suppliers refused the terms, inhibiting the chain from getting key new-releases and eventually leading to the company entering administration.

New rules by supermarket giant Tesco to fine its suppliers for late deliveries caused ructions earlier this year. One Tesco supplier told The Grocer that “the sort of sums involved are enough to take a small company down. This sort of approach totally alienates the supply base and it’s going on across the board.”

Conversely, the Government has admitted that the laws designed to ensure suppliers were paid on time aren’t working.

Supply chains need to work both ways to ensure that in times of hardship all parties are able to survive.