Supply Excellence
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Houston: Dirty Supplier Tricks. And How to Combat Them.

June 1st, 2006 · by Tim Minahan · 4 Comments · best practices, sourcing, supplier management

The final stop of the Supply Management Forum brought me to the oil fields of Houston — where profits are high, but drilling equipment is scare. (More on that later.) One of the more intriguing conversations I had was with Chris Knirk, Director of Global Sourcing at global sweets kingpin Cadbury Schweppes about one of the unspoken hazards of online sourcing initiatives: supplier resistance.

When launching Cadbury’s global e-sourcing program, Chris noted several tactics suppliers used to try to undermine the initiative. Here’s what he says to watch out for:  

  • Suppliers will attempt to engage alternate stakeholders within your company to gain information about competitors and your intent. Chris says incumbent suppliers also tried to generate concern among internal stakeholders about reduced performance and quality of any new competitors.

  • Suppliers will attempt to create doubt by calling the online sourcing process into question, raising concerns over unfair communications, the ethics of auctioning, and the method of evaluation and award.

  • Suppliers will attempt to escalate influence to higher levels within your organization.

  • Suppliers will attempt to delay the process in hopes of applying more influence.  

Cadbury Schweppes overcame these issues by employing several counter offensives. First, the confectionery and beverage giant put Chris, a company veteran in charge of the program. “Having been around 12 years, I knew where to go for support and who the key stakeholders were. I had a better chance of securing alignment and support for the initiative than someone newer to the organization.”

Next, Chris’ organization established a detailed sourcing process that clearly stated the roles of internal stakeholders and defined protocols for open supplier communications, fair negotiations, and award decisions. “A diligent process really helped us with program adoption and compliance,” says Chris. “We emphasized fairness and open disclosure throughout the sourcing process.”

Cadbury reinforced its standards through workshops with internal stakeholders and by “shutting off” unapproved or non-preferred suppliers in the system. Stakeholders were also invited to attend reverse auction events and were asked to discontinue any offline business discussions with suppliers in order to maintain integrity and open disclosure throughout the process.

Cadbury also used an iterative negotiation approach, securing pre-requisites, such as non-disclosure agreements and delivery and payment terms, during the electronic RFP process prior to final price and cost negotiation in a reverse auction. “By the time we get to [auction] it is clear that participating suppliers are qualified to win the business and they clearly understand the criteria we are using to determine award.”  

 

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4 responses so far ↓

  • 1 Lisa Reisman // Jun 1, 2006 at 10:05 pm

    Great article! I think the first example of how suppliers try to undermine e-sourcing efforts rings true. As a third party that works with medium sized companies, suppliers are always trying to sell their “high quality” around the buying organization. We also see “no reverse auction” policies from suppliers which is code word for “I’m not competitive, I’m high cost”. And forget about quality…

  • 2 Tim Minahan // Jun 3, 2006 at 9:51 am

    Thanks, Lisa. It would be interesting to hear from your experience helping SMBs with their sourcing strategies (www.aptiumglobal.com), what other ways suppliers attempt to derail competitive e-sourcing initiatives. The Supply Excellence audience would also be interested to know if these dynamics change when sourcing from suppliers in emerging markets, such as China or Eastern Europe.

  • 3 » Supply Management Forum: A Retrospective…- Supply Excellence // Jun 5, 2006 at 8:45 am

    [...] Houston  [...]

  • 4 Supply Excellence » Why e-Sourcing is Good for Suppliers: Part I // Aug 8, 2006 at 1:14 pm

    [...] Myth #2: e-Sourcing is unfair to suppliers. Untrue. In most cases e-sourcing introduces greater integrity into the sourcing process than existed in the offline mode. e-Sourcing mandates that buyers clearly articulate their selection criteria and award decision framework to all participating suppliers. Suppliers go into a negotiation full knowing how they will be judged and how the award decision will be made. Any clarifying questions asked by suppliers and corresponding answers from the buyer are available for all suppliers to see, further leveling the playing field. This was best summarized by a VP of Sourcing at Cadbury Schweppes “We emphasize fairness and open disclosure on both sides of the sourcing process. We have shut down ‘backdoors’ for internal stakeholders and suppliers.” [...]

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