Having worked on both the supplier and buyer sides within the telecom and renewable energy sectors, and as a negotiator navigating these challenges daily, I’ve witnessed firsthand how critical and delicate these relationships can be. Although both parties depend on each other for success, conflicts frequently arise over pricing, delivery schedules, quality expectations, and contractual terms. Moreover, traditional industry practices have exacerbated these tensions by fostering an environment where power imbalances and risk-shifting are common.
Think about it. We teach our youth to be open and fair on the playing field. So, why do we have such a hard time doing the same in the business arena? Maybe the ‘all about me’ attitude doesn’t work so well in business.
Clinging to outdated methods only hinders progress. To move forward, businesses must adapt, cooperate, and the pursue common ground rather than push back with outdated practices or external pressures.
So, what are the root causes of supplier-buyer conflicts?
From my experience negotiating contracts and mediating disputes, I’ve seen that at the heart of many supplier-buyer conflicts lies a fundamental difference in priorities. Buyers often prioritize cost efficiency, demanding lower prices and stricter contract terms, while suppliers focus on sustainability, quality, and profitability.
This disconnect frequently leads to disputes over:
- Pricing pressures – Buyers push for lower prices, often without considering the impact on suppliers’ margins or long-term viability.
- Risk allocation – Many buyers – particularly in industries like engineering, and construction (EPC) – shift risks onto suppliers, forcing them to bear financial, logistical, and compliance-related burdens.
- Delivery and performance guarantees – Suppliers are often expected to meet stringent delivery schedules and quality standards, even when external factors such as supply chain disruptions or economic fluctuations interfere with their progress.
- Contractual rigidity – Standardized contracts typically favor one party, often leaving little room for negotiation or flexibility when unforeseen challenges arise.
Flaws of standard industry practices – like transferring risks – also impede progress
Many industries continue to operate on outdated models that prioritize short-term gains over long-term stability. The tendency to transfer risks down the supply chain not only weakens suppliers but also introduces inefficiencies, increases costs in the long run, and fosters an adversarial rather than a collaborative approach. A significant issue lies in the legalese of using industry standards as a way to push unbalanced terms onto suppliers.
Rigid contractual language often favors buyers, leaving suppliers to bear an unfair share of the risks and responsibilities. The reliance on rigid contracts and aggressive negotiation tactics may lead to short-term cost reductions, but they often result in lower-quality outcomes, strained relationships, and reduced innovation.
Moreover, the pressure to conform to industry norms, historical precedents, or shareholder demands can push companies into unsustainable decision-making patterns. Just because a practice has been widely used in the past does not mean it remains effective in today’s rapidly changing business landscape. Adaptation is key to ensuring stability and fostering innovation.
Finding a common ground by using a collaborative approach
Rather than perpetuating conflict, businesses should strive to create mutually beneficial relationships. This requires a shift in mindset, allowing both buyers and suppliers to start recognizing that success is not a zero-sum game. It is a shared objective.
From what I’ve seen over more than a decade working in the industry and negotiating agreements, finding common ground is the best way forward. This approach doesn’t just apply to the supplier-buyer relationship but also to the buyer-owner dynamic in terms of Engineering, Procurement and Construction (EPC) contracts and even to lender relationships. A more balanced and forward-thinking approach should include:
- Fair risk distribution – Instead of offloading risk entirely onto suppliers, buyers should work collaboratively to develop shared risk management strategies. This could include flexible contract terms, joint contingency planning, or performance-based incentives.
- Transparent communication – Open discussions about pricing, challenges, and expectations can lead to better solutions that work for both parties. Transparency builds trust, which is essential for long-term partnerships.
- Flexible and adaptive contracts – Contracts should be structured to allow you to make adjustments when market conditions change. Adaptive contracts encourage collaboration and proactive problem-solving, not rigid agreements leading to disputes.
- Strategic partnerships over transactional relationships – Businesses that treat suppliers as strategic partners rather than mere vendors can benefit from improved efficiency, innovation, and reliability.
It’s time to move beyond the past
The business landscape is constantly evolving, and the old ways of operating are no longer sufficient to meet modern challenges. From what I’ve seen over more than a decade working in the telecom and renewable energy sectors, and negotiating high-stakes contracts, the adversarial approach of shifting risk, enforcing rigid contracts, and prioritizing cost-cutting at the expense of supplier health ultimately weakens the entire supply chain. Instead, we need a shift in our mindset – one that prioritizes cooperation, adaptation, and mutual success.
We must all continue to learn and understand business dynamics, particularly within procurement and legal teams. It’s time to challenge outdated industry norms and advocate for fairer, more collaborative business practices. Let’s work together to create a business environment that values partnership over conflict and long-term success over short-term wins.
If you’re a buyer, consider how you can foster better relationships with your suppliers. If you’re a supplier, don’t hesitate to push for fairness and transparency. True progress happens when both sides commit to working together. As a negotiator, I have seen firsthand that when both sides engage in open and fair discussions, the results are far more productive and beneficial for everyone involved.
References
2024 Most Negotiated Terms, World Commerce & Contracting
The ROI of Contracting Excellence, 2023 report, World Commerce and Contracting
The 2024 Study on The Purpose of Contracts, World Commerce and Contracting
Fisher, R., Ury, W., & Patton, B. (2011). Getting to Yes: Negotiating Agreement Without Giving In. Penguin Books.
Liker, J. K., & Choi, T. Y. (2004). Building Deep Supplier Relationships. Harvard Business Review.
Handfield, R. B., & Nichols, E. L. (2002). Supply Chain Redesign: Transforming Supply Chains into Integrated Value Systems. Pearson Education.
Porter, M. E. (1998). Competitive Advantage: Creating and Sustaining Superior Performance. Free Press.
Chopra, S., & Meindl, P. (2021). Supply Chain Management: Strategy, Planning, and Operation. Pearson.
ABOUT THE AUTHOR
Mauro Ribeiro’s responsibilities include preparing commercial offers and leading contract negotiations, acting as facilitator among internal teams, managing risk exposure, executing contracts, and guiding internal teams on contract interpretation and operations at one of the world’s largest multinational telecommunication, information technology, and consumer electronics companies, based in Shenzhen, China. Key achievements:
- Lead negotiator for the 3 largest carrier accounts, solar business accounts and enterprise business accounts.
- Renegotiated key contracts securing annual profit increases and minimizing liability exposure.
- Created contract templates, processes and tools for company-wide use and provided on-going team training for employees.
ABOUT HUAWEI TECHNOLOGIES
Founded in 1987, Huawei is a leading global provider of information and communications technology (ICT) infrastructure and smart devices. Their 207,000 employees operate in over 170 countries and regions, serving more than three billion people around the world. Their chief mission statement is to remain committed to bringing digital to every person, home and organization for a fully connected, intelligent world. Huawei continues to invest in basic research and open innovation, and accommodates and addresses customer needs with an open mind, while steering these needs with science and technology. They have also built flexible business models and encourage numerous industries to adopt a vast range of models and applications.
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