Daily Archives: March 24, 2008

Are You Ready For (a) Divorce (from Your Strategic Source of Supply)?

You might think that divorce rates in North America are high, with some statistics as high as 50%, but in the business world, divorce is the name of the game. As a recent article over on Supply Chain Digest points out, no matter how valuable a strategic “supplier alliance” may be at various points of a relationship, for a high percentage of them, the relationship will change substantially and probably end somewhere along the way.

At some point in time, one of the following indicators will arise:

  • multiple requests on either side before action is taken
  • requests need to be made for items or services that used to be proffered without asking
  • the buying organization starts to feel that it is being “nickel and dimed” by the supplier

At this point, the “marriage” is coming to an end and you’ll start to see the commitment of the supplier decreasing rapidly, the sharing of information dwindling, and contractual language identifying each party’s dos and don’ts increasing … and you will know that problems are brewing.

So what do you do? Well, you start by calling in the corporate equivalent of the Ashley Madison Agency and discretely find yourself your next partner – before the current relationship ends and before you’re ready to even announce the shift.

As the article points out, you need a plan to end a strategic supplier alliance – and the most important part of the plan is knowing who your new strategic supplier will be. Strategic alliances exist because there is one or more functions that are critical to your businesses that you are not capable of performing yourself, or at least not capable of performing cost-effectively. This means that even if the current relationship is sour, you can’t just end it without crippling your business. Thus, you need to have a new supplier ready to take over.

Once you know who your new supplier will be, you’ll need to prepare for the transition. This will include:

  • getting the appropriate approvals to end the relationship
  • understanding the legal ramifications and taking steps to minimize the damages that could ensue (by working with Legal)
  • understanding which organizational groups will be affected, how they will be affected, and readying the information necessary to address their concerns at the appropriate times
  • understanding which systems and processes will be affected and outlining the necessary changes
  • creating a transition plan to transition from the old strategic partner to the new strategic partner

Finally, you’ll need to break it off. If you’ve done your homework, although it will be painful, it should go smoothly. Regardless, it will, as always, be an experience – so be sure to learn from it.