How to Successfully Break-Up With Your Incumbent Supplier
Anyone who has ever completed a Request for Proposal (RFP) has had the unfortunate experience of informing all but one or two suppliers they have not been awarded the business. It may be difficult and at times uncomfortable, but when the unchosen supplier is the incumbent, there is more to manage than just this conversation. How this transition process is handled can either help or hinder the success of moving to a new supplier relationship. There are a few steps you can take to smooth the transition and ensure all parties are as satisfied as possible.
I think we are better off as friends.
Communicate the change to all involved parties.
When you make the decision to change suppliers, there are a number of stakeholders that need to be made aware. Ensure all levels of employees within the terminated supplier have been informed of the decision to discontinue the relationship. During these conversations, discuss opportunities for improvement or challenges that exist between the parties, but also remember to highlight how the supplier has been an asset to your business. Doing so will show the incumbent supplier that you did not make this decision lightly and will allow for a more committed transition from them.
You’re going to make someone really happy someday.
Do not forget about the current contract.
The incumbent supplier must continue to support your company until the contract expiration date. Not only can you not give up on the supplier, don’t allow them to give up on you. Keep in mind that the incumbent is losing business and going through this transition only serves to remind them of that failure. Make sure expectations are set right from the beginning. This is a mutual effort sustained to support one another through this period of change. As a result, keep the lines of communication open to help keep them engaged.
I love you, I’m just not IN love with you.
Make sure transition meetings are scheduled in a timely manner.
Your incumbent may need to work directly with the new supplier, so making those connections early and often are crucial for a successful transition. It helps to know if the two suppliers have worked together before and find out from the new supplier how those transitions have gone previously. Using the knowledge provided by your new supplier can help smooth out any adversarial reactions from either side. Also, make sure you are involved in these meetings to build a bridge between the two parties and show your vested interest in both current and future relationships.
Beware the rebound.
Think about a potential transition when forming the new contract.
During the contracting phase with your new relationship, include language regarding the transition, should you decide to part ways. This certainly feels like a pre-nuptial and no one wants to think of the end at the beginning of a relationship, but being prepared up front allows for a much smoother transition if the relationship does not work out. Potential language to add to the contract can include simply stating something along the lines of:
- Supplier agrees to fully cooperate with client in transitioning the account to a successor agency.
- Supplier will devote its best efforts prior to the effective termination date to cooperate with client to minimize interruption of the work and the assignment of another supplier.
I need my space.
Develop an off-boarding process for your suppliers.
Similar to including contract language regarding supplier transitions, prepare an off-boarding process that minimizes disruption to your supply chain. An off-boarding process will also help to establish how any data or assets will be transferred or delivered to a new agency. This includes establishing clear timelines and communicating action items to the involved parties.
It’s not you, it’s me.
Again, Communicate, Communicate, Communicate with both parties.
As with any relationship open communication is imperative for success. By clearly stating that a transition is happening and what expectations are from both parties allows for a much smoother interaction and successful transition. Change may take time but communication is key to keeping the transition on track, eliminating the need to extend timelines or even double pay for services due to a poor transition.
While managing through a transition from an old supplier to a new one may be complex and time consuming, it is just as important as selecting the correct supplier in the first place. If a step is missed, the new supplier may not be set up to succeed. Or if the departing supplier is mismanaged, future business relationships or opportunities may be damaged in the process. Just remember, breaking up is hard to do, but can be done professionally and lead to positive new beginnings.
Great article. We have found that far too many eAuction negotiations end up with the incumbent even though they dont end up in first place. Some of this is to do with the switching cost and others to do with the strength of relationships. The keys factor we have found to help transition is to agree at the beginning of the relationship how an exit might look like and to also ensure you are managing risk mitigation should a transition away ever happen. This would include anything and everything such as who owns the supplier drawings, what would you do with tooling through to processes and also stock. It is always a pain to negotiate these type of items with the contract but it is so much easier then doing it during the contract where the supplier can tend to make things tricky.