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Supermarkets hammer suppliers…

http://www.guardian.co.uk/environment/2011/jul/02/british-farmers-supermarket-price-wars?INTCMP=SRCH

Is there a more dominant relationship than that between Supermarkets and their suppliers at the present time? The above article would suggest not and many are now quite rightly considering whether this is entirely healthy. Of course some of the examples given by The Observer could be extreme or un-representitive or on the other hand they could be widespread. Either way the economic model will always be skewed if a very small number of buyers are purchasing off a huge number of suppliers. Inevitably suppliers will find that as well as a large proportion of their turnover being in one (supermarket) basket, heavy investment will often have been committed. The question then is how much this is exploited by the buyer?

The supermarkets would not necessarily bully Heinz or Kellogs perhaps but the temptation to achieve financial internal targets by squeezing a smaller dependent supplier must be there. And the key word is “dependent”

A big and often underestimated element of credit management is understanding the relationship between the two parties in the wider context. It is only really from that position that you can properly negotiate existing settlements or future relationships. The legal position doesnt change but the will to enforce will vary and when a client is dictating changes to existing contracts without fear of recourse, the will is very weak indeed.

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