Lessons for business people from the Vaccine supply headlines…
Here at MLP Law, we have been fascinated with the recent supply issues causing headlines across various media.
In this blog we explore not the human angle (which is self-evident, and better left to others), but the valuable lessons businesses and business people can learn from the approach. Negotiations, supply chain management, supplier relationship management, and the all-important differences between Price and Value. We cannot profess to have been involved in these negotiations though we have had clients involved in a number of supply contracts arising out of procurement through the pandemic.
Too few businesses recognise the value of looking after their supply chain, and too often focus solely on price which means a loss of focus on what actually might be the most important element of a relationship.
Results and time delivery targets or price?
Quality and guaranteed supply or price?
Preferred customer status if there is a shortage of raw material / stock or price?
Good fast cheap – Which two do you want? All three simply isn’t possible or viable.
It seems as a large block purchaser the EU drove a hard bargain on the price they were paying. Good news for the finance / treasury team, but at what cost?
In normal commerce, often risks such as shortage of supply, delays, exchange rate and macro-economic factors aren’t considered enough. There is a risk that in looking short term at the bottom line a best price is pursued instead of best value.
What does good value look like to you?
Is that reflected in the commercial terms and documented contractual agreement(s)?
Whilst lawyers identify risks, great lawyers go further and whilst mitigating risks never lose sight of the fact that, in commercial agreements, a deal is to be done. Not always at any cost, though you should recognise the benefits of the deal to both parties / all parties.
Identify early on the real concerns of each party, what is motivating them to negotiate and enter into this agreement? Often, mistaken assumptions and misunderstandings can mean the discussions focus on the wrong areas (price – all customers want the best price right?) instead of what really matters –
• Assured delivery
• Preferred status in a shortage or if delays hit the sector
• How Tariffs and additional costs are borne between the parties
All factors that can be affected, and influenced, with a good supplier relationship management approach.
Undoubtedly, we see a disadvantage in larger, more bureaucratic, organisations where too many people (production, safety, finance governance, board) can stifle innovation and commerciality need to sign off on an agreement leading to delays and ticking boxes. The organisation may get a good deal technically but at the cost of delays and being slower to market, and slower to respond.
The smaller, more agile company can get things done and agreed a lot quicker.
If you have any questions or queries in relation to this blog, please do get in touch – by telephone on 0161 926 9969 or by email to email@example.com.