The High Cost of Poor Supplier Relationships

We've seen several headlines over the past six months about how poorly suppliers are being treated these days. Here's a sampling:\r
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Tesco faces fresh accusations of 'bullying' suppliers over price cuts (The Telegraph)\r
Woolworths accused of bullying suppliers into paying millions for Cheap Cheap campaign (The Sydney Morning Herald)\r
One in five suppliers bullied, says UK small business lobby (Financial Times - sub. req'd)\r
Big Companies Pay Later, Squeezing Their Suppliers (New York Times)\r
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Extending payment terms to as much as 120 days is the most common tactic large companies are using to benefit at the expense of their suppliers. As noted in the New York Times article linked above:\r
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Most [large companies extending payment terms] are trying to maximize use of their capital, bankers who work with supply chain finance say. By pushing out payments to suppliers to three and four months, companies have more cash for any number of projects. Mondelez, for one, is buying back stock. Kellogg is in the middle of a restructuring. Procter & Gamble's move to extend its payment terms to 75 days in 2013 has probably added $1 billion so far to its cash flow, according to one estimate.\r
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Whether it's extending payment terms, or taking a strong 'What's In It for Me?' approach to negotiations, the end result is often the same for companies that bully their suppliers: short term gains that are ultimately negated by increased costs, quality problems, supplier bankruptcies, and other issues further down the road.