A Squeezed Supplier Never Forgets

Computerworld - Anyone can cut supplier costs in a buyer's market. Hard negotiations that include pressuring for significant price concessions are expected. Many hungry suppliers will give in to your demands for lower prices, figuring that some work is better than none. But you should avoid unethical methods that leave your suppliers angry and waiting for revenge.
Things have already turned ugly. IT contractors on a job in Boston were told they had to work overtime but couldn't put the extra hours on their timecards. Several contractors refused to comply and recorded all of their hours. They found their contracts terminated one week later, and the remaining contractors got the message.
The owner of a small Atlanta-based accounting firm signed a contract to perform some work for a Fortune 500 company. Two weeks later, she got a letter stating that her hourly fee had been reduced by 10%. Furthermore, the hiring company would be deducting an additional 5% if it paid her bill within 15 days from the date it claimed to have received the bill. When she called the company to complain, she was told that all of its professional services firms were "voluntarily" reducing their fees, and she could take it or leave it.
In both cases, the rules were changed unilaterally, after the contracts were signed. The suppliers continue to work on these jobs, but they feel . . . well, propriety prevents reprinting their actual words here, so "cheated" will have to suffice.
The buyers could likely have gotten concessions from these suppliers by applying less extreme measures. At the very least, they could have chosen to exercise the standard "30 days' prior notice" clause in their contracts and renegotiated rates without creating an adversarial situation.
Alternatively, the buyers could have included their suppliers in the search for a solution to cost pressures. Allowing the supplier the opportunity to recommend how to reduce costs may result in a creative solution, and it could foster cooperation instead of hard feelings. Suppliers' suggestions may include the following:
• Decreasing service levels. Loosening guaranteed response times for noncritical areas might be a fair trade-off for lower fees.
• Extending contracts. Lengthening the contract reduces the supplier's sales costs and allows better workload management.
• Using commodity products. Generic hardware or software could be substituted for proprietary technology.
A supplier's suggestions may be unacceptable. But imposing Draconian measures without discussion will certainly rankle the supplier. These seeds of resentment often result in negative payback that could have been completely avoided. And as