Intro/Outro (00:03):

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Kelly Barner (00:31):

Hi there, I’m Kelly Barner, the host of I O P for procurement here on supply chain. Now, can I ask you a personal question? How do you do under stress? One of my friends has a great way of describing what people do when they’re faced with a stressful situation. She calls it the dance, and it’s not a real dance. It’s more of an emotional response that becomes habitual. Some people instantly fold. Other people fight back. Some people act defensive, others, wallow and self pity. Other choices include blaming others, denying reality and engaging in self destructive behavior. Now, when we are in long term relationships and this applies to our personal lives, as well as our professional roles, our dance has a way of becoming tied to the dances of others. Sometimes we can move and lock step and everything is very smooth and beautiful. Other times, not so much.

Kelly Barner (01:31):

And if someone doesn’t change their dance moves, you could end up in a very bad situation. For long time. Procurements stress dance was to beat on suppliers. If we had a bad day, they had a bad day. If we were pressured to deliver more savings, they got a nasty gram, but after a lot of hard work, we finally got into a place where we’re changing our dance. We realized how important supplier relationships are. They’re really important. We care about the supplier experience and many companies are deliberately investing in it. Ultimately we’re striving for being designated as customers of choice, and then in the background first, very soft and then louder and louder. The dance music starts. Now. We don’t even need to discuss the pandemic to look for sources of stress. Let’s just focus on supply chain, disruption, ships. Weren’t getting out of China. If they did, they got stuck off of long beach.

Kelly Barner (02:41):

Retailers have been in a bad place and some including big companies like target and Walmart chartered their own container ships to get inventory here. But then there were delays. Misalignments changes in consumer demand and all that inventory that they worked so hard to bring to the us, became an albatross around their necks. Now there’s millions of dollars in unwanted inventory sitting around. There’s no free cash. And the next retail season is just around the corner. Old habits die hard. And for many companies, those dance moves came back stronger than ever. According to a recent article from Reuters target has changed their logistics arrangements with their merchandise suppliers, expecting them to pay to transport goods from China themselves, and store them in their own. Us warehouses at their own cost until target is ready to take delivery. Other orders have been canceled or pushed out or reduced in size.

Kelly Barner (03:44):

And all of it has led to unexpected costs and lost business. For those suppliers. Walmart is dancing to a similar tune. In addition to tactics like the one we see from target they’re charging suppliers, a pickup fee for merchandise, they have to transport to their stores. Now here’s the thing about the dance. The suppliers have learned new moves in that same Reuters article. I was absolutely shocked to see target suppliers speaking out against the company to the press. Apparently the days of suffering silently to protect a deal are gone. These suppliers have been vocal and specific telling target and the general public exactly how they feel about these changes and what it is doing to their business. I asked my art of procurement partner pH eon what he thought about all this and what it might mean for the rest of us. And here’s what he said.

Kelly Barner (04:43):

These suppliers feel as though they’re not being heard. This is their last resort. That’s a pretty dangerous game because it will be a long time before some of these larger organizations will want to work with a partner that goes to the press when they have challenges. But if they don’t feel like they’re being heard, then there’s not really anywhere else for them to go. Now, it’s important for you to mention that all of the named suppliers in this article are merchandise suppliers or direct spend as procurement would say. So that means that the procurement teams that these retailers may or may not actually have been involved, but the risk is still present. That procurement will succumb to the same pressure and return to our old dance. In fact, there’s no way of knowing that it hasn’t already, if targets indirect suppliers are not speaking out as boldly as a few of their direct suppliers are, we would have no way of knowing what moves Target’s procurement is moving to.

Kelly Barner (05:45):

And yet blaming retailers like target and Walmart for the pressure that they’re under. Isn’t a good plan either. That is far too simple of a response. Here are just a few numbers that you want to know. As of June, 2022, target had 15.1 billion in unwanted inventory. Their net profit margin for July through October of 2021 was 4% down by 54% year over year in may of 2022, Walmart was stuck with 61 billion in merchandise, 20% of which they wish they didn’t have at all. That’s 12.2 billion worth of inventory regret. And then in August that policy, I mentioned, Walmart started assigning a fuel surcharge to suppliers whose merchandising must pick up and bring to stores in warehouses. Even though that has always been the logistics plan. So the stakes are high for everyone on the dance floor. My key takeaways from this whole situation for procurement professionals, feeling the pressure ours follows, make sure you know who other than yourself is talking to your suppliers, or should I say dancing with, try to keep track of what is being said, how it’s being said and how others are responding.

Kelly Barner (07:17):

If you have to ask something of your suppliers that is truly more than a favor, like something expensive, for instance, expect to give something in return. You’re going to give regardless of whether or not, you know, what it is you’re giving. So you might as well ask upfront and have it spelled out. Please don’t send nasty grams ever. Once you put it in writing you no longer own, those words, find a way to stay in touch with how direct spend supplier relationships are being managed. Even if the procurement team isn’t responsible for them, you may catch flack for what’s being said to merchandise, our direct suppliers, and finally pay your suppliers in accordance with your contracts period, no negotiation at the end of each episode of dial P I encourage listeners to share their point of view about what I’ve shared. And I’ll say the same thing to you now, how do you feel about the approaches that target and Walmart are taking?

Kelly Barner (08:25):

How do you feel about the dance that they’ve chosen to engage in given the very real stresses and pressures that they’re under? What do you think about the choice of these merchandise suppliers to not only speak out, but to speak out in the press with quotes, attributed to members of their executive teams, you can comment on whatever social media platform you found this on, or you can send me a LinkedIn connection request or a direct message. Let’s turn this dance into a conversation that all of us can learn from. There may just be some moves that we can learn from each other. And listen, just because it’s stressful and the stakes are high doesn’t mean we shouldn’t wanna look good on the dance floor. I’m Kelly Barner, host of dial P for procurement here on supply chain. Now, thank you so much for spending these few minutes with me. And I hope to hear your thoughts about what I’ve shared in this episode.

Intro/Outro (09:27):

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