In the past few years, I have been somewhat taken aback by the habits of buyers of large automobile companies in purchasing engineering services. There is one habit that bothers me in particular:
Companies requesting and negotiating large contingents of hourly quotas with the to-be-expected high discount rates.
The hangover occurs when the services are only partially called up and the rest forfeited at the end of the year. What is the takeaway for this mode of business? Would you surmise anything nefarious?
I think about how an OEM would behave if I would negotiate the purchase of 30 vehicles with the corresponding discount, but then I decide to take only 3 cars and I’d send the rest back, keeping the discount of course. I am sure I would think of something reasonable to say, no?
Reduced prices for high output make sense, since I then have less expenditure in the sales and distribution department with secure utilization ensured for part of my team.
If the performance is only partially retrieved, I have a two-fold problem: The team, which I had scheduled to handle the apparently large project, is now partially without work, those who work the project have a lower cost contribution.
Each unproductive engineering hour is lost forever.
Based on the quote, “no plaintiff, no judge”, some buyers use their market position to push their games. For queries they are neither available by phone or email, never responding.
In the short term this may all work, but actually these practices are no longer bad habits, but simply fraud at the expense of the suppliers.
At the same time, I am expected to fulfill and sign a self-commitment to sustainability, compliance and fair dealings among business partners – one after the other.
I like to comply to the values of the “Honest Merchant”. The honorable merchant stands by his word, his handshake is worth something. It grants and encourages commercial trust. Fair negotiation, punctuality, correct accounting practices. The principle of “one man, one word” is one of the universally accepted ideals of commercial commerce. The handshake between the contract partners is symbolic for this. Even if no direct personal contact takes place because we use telephone, exchange of letters or emails, the message associated with this symbol is clear and comprehensible.
If large engineering firms use dumping prices for their proposals and their margins are on clause management, when trade unions do not fight against unfair purchasing practices while pushing projects off the cliff so the purchasing department will pay more attention to the quality of the offers at the next tender, I see honorable business practices in the distant future. Negotiations currently do not correspond with queries and contract orders.
Anything we can do to push back?
Units to be purchased and discounts based on number of units should be recorded in writing. Otherwise, a reimbursement of sales (also kick back) is a sure thing. The rebate is thus granted quasi retrospectively on the basis of the actual turnover achieved.
Do you see this differently? What is your opinion? I look forward to your feedback.