Who owns your supplier? And does it matter?

Wetherspoons, one of the UK's largest pub chains, reported their results last week. What was interesting was the comment of Tim Martin, chairman and founder, that although their cost pressures were increasing, he didn't think his customers were capable of accommodating increased prices.  So he was planning to take the hit on margins, which of course is not what all the shareholders or City analysts wanted to hear.

But Martin appears to follow the principle that if you put the customers first, then in time profits will follow, and shareholders will eventually be satisfied.

I once worked for a large US publicly quoted firm - an excellent business in many ways, with some great products and people. But everything could change based on what had to be achieved for the financial reports and the expectations of Wall Street analysts - not just on an annual basis, but quarterly (US firms report with that frequency). Entire strategies would be over-turned to hit a predicted EPS number.

Wetherspoon's pub, Liverpool

Perhaps we should look at our suppliers more closely in those terms - what is really driving them and their behaviour?  Privately owned firms can be capricious and illogical at times, but don't tend to be driven by such short term goals. Perhaps counter-intuitively, firms owned by private equity or venture capitalists can be quite long-term in their approach  - it may well depend on the stage in the process (buy, build, prepare for sale, etc.)

But public companies probably suffer more than most in terms of the pressure to meet short-term analyst and shareholder expectations.And while that can bring opportunities (negotiating deals just before the close of a quarter or year), it can mean that at times, the customer definitely does NOT come first! Unlike the rather wonderful Wetherspoons..

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First Voice

  1. Andrew:

    Leaving aside the statement about Wetherspoons being “wonderful” (their pub where I live attracts some ‘interesting’ characters attracted by cheap booze and the possibility of a fight as an evening progresses), what this story reminds me of is the need to clearly understand what the supplier thinks of a customer. Too often procurement professionals assume that the supplier must desperately want the business or have the same view of the world as they do. The reality can be very different. It is key to be very aware of how the supplier views you, the contract and the company you are representing – their tactics and approach will usually be driven by this dynamic. If you can better understand their perspectives then you will have a much better chance of getting a good deal for all involved.

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