As per our economic damnation post, sometimes it is not only the case that bigger is not better, but also that bigger takes a bigger bite out of the limited pot that you have to work with.
To point this out, we reviewed two of the big examples of anti-scale that are often mistaken for economies of scale: energy and short-term contingent labour. Since most energy plants still rely on coal, oil, and natural gas, energy costs are ultimately dependent on the unpredictable prices for these natural resources, which depend on factors that very few governments or corporations can even influence. Similarly, if the resource skill-sets that are required are scarce, in high-demand, and there are only a few providers to choose from to begin with, the last thing you want is them consolidating and holding the power to charge as much as any one client can be convinced to pay.
But if economies of anti-scale were the only thing one had to worry about when Mega-Corps entered the picture, all would be manageable, but Mega-Corps take you out of the frying pan and dump you in the lava pit when negotiation time comes and categories that were once in your favour all of a sudden shift very fast to their favour.
So, since Corporations Will Soon Rule the World thanks to the likes of politicians like the Harperman (who made Chicago politicians look good), and bring a whole new level of damnation to your Procurement world, we need to be ready. What can you do?
1. Make sure contracts have a key survivability clause.
The contract must be enforced regardless of a change in ownership structure or assignee. Make sure that your supplier can’t have it’s contracts null and voided the date it is acquired.
2. If a M or A is expected, lock in critical supply with a long term contract.
Mergers and acquisitions increase cost, increase chaos, or increase timelines — none are good for critical, time-sensitive, sourcing projects. Be sure that if an M & A is in the works, that will affect one or more key or strategic suppliers that you depend on, that you close critical sourcing projects (well) in advance of the closing date.
3. Become a customer of choice.
Supplier sales teams fight for their customers of choice. When push comes to shove and there is not enough supply to go around, you will get it. When the parent company wants to push prices up to cover the costs of the acquisition, the sales team will look elsewhere. When you need access to innovation, they will fight to give it. But, despite many contractual claims to the contrary, very few clients are actually customers of choice.
Fortunately, it’s not that hard to be one if you really want to. Start by:
- Paying on Time
In an age when many organizations are trying to continually delay payments, paying on time sends a strong message.
- Solving Problems Constructively
Everyone has problems, including your suppliers, and everyone screws up – but if you approach seeking a solution, versus a penalty and retribution, they will favour you over others.
- Improving Their Efficiency
Help them help you, and do it in a way that helps them help everyone, and they will fight to keep you as you deliver value, versus just revenue.
- Helping Them Innovate
We all want innovative suppliers, but have you ever thought about what your suppliers want? The smart ones want innovative customers who will help them innovate, and not worry about whether they own the rights or not. A supplier that sees you as a customer of choice will always give you first access.