When you back is against the wall and you orders are so high that the short term and mid term out look is bleak as far as servicing all of you customers, who do you service.
Well this is a question that a supplier of ours faced and we were on the short end of the proverbial stick. With all the natural disasters that befell the US over the last few years the building industry was going through the roof, and all the manufactures of building supplies were scrambling to add capacity to meet the demand. Well our tube supplier was not able to react so they were in the position that they could supply 70% of their customers and they would have to tell the remaining that they were on allocation and what they got was all they had to give. This basically put the 30% in a position that if they wanted to supply their customers they would have to switch suppliers.
How did they make this decision, well it was not based off of the fact that we were their largest or at least one of the top two. Also not base on the fact that we had plans to expand and increase orders by 12% the following year. No it was based of the fact that they made the lowest margin off of us VS all the other companies. So they made a very short-term decision and did not consider the long-term effects. Yes the made more money with what they had in the moment, but now that the market is down the smaller companies are going out of business and they are knocking on our door wanting back in because they do not have enough volume to run their plant effectively. Will we let them back in, well the person that makes the decision to let them in would probably get fired after what they did to us by just flat hanging us out to dry with no warning. So the answer is no, will we let them keep bidding for our business. Why yes we will, they are shooting very low prices at us and in a competitive E auction (online bid to become our new supplier) they are proving to be very beneficial.
The person that made the decision on who to drop made a very near sighted decision and did not consider the long term value of the account or the long term consequences of losing an account this large. Some times making the decision based off of quick cash is the wrong thing to do, you must always remember that maket spikes come and go and the long term market out look is a key to making good decisions.
Comments