Don't Shoot the Messenger

Don’t Shoot the Messenger1 On July 5, 2000, the unit general manager of Billings Equipment, Inc., instructed the supply management team to renegotiate existing agreements for a 10 percent reduction with major suppliers because of target costs exceeding expectations. Jeff Martin, a supply management engineer, was instructed along with the entire purchasing staff to contact his suppliers immediately with what they would view as very bad news. Jeff had to face his suppliers with this demand. Company Background In June 1998, Billings Equipment, Inc., formed a new business unit and opened a plant in Seattle to produce a new line of earthmoving machines for the construction industry. The organization had a history of impeccable ethical treatment of suppliers and was considered to be a leader in the industry. For two years, Jeff was actively involved in reducing costs and cycle times of his suppliers. Everyone involved would agree that the process was emotionally heated on occasion, with shedding of cooperative blood, sweat, and tears. Jeff’s suppliers had invested many personal hours and sizeable expense to reach this point in time. It had evolved into a strained, but working, relationship. Relationship with Suppliers During the start-up period of the program, a very aggressive timeline and target cost drove emotions to a frenzied pace. Early supplier involvement in prototype and testing activity was cultivated to encourage active participation in the development of this new product line by all that had equity in its future. Suppliers were pushed to the limit on material and tooling lead-times, exhausting goodwill and testing commitments. Everyone involved, including suppliers, invested personal time and effort toward meeting the market timelines. Purchase agreements were negotiated, and parts now were being received to support production ramped-up toward market introduction. The Problem The push to production forced acceptance of early design of many components, which...