How to Avoid International Disputes: First, Be Good to Your Suppliers.

 By Santiago A. Cueto on May 16th, 2010 Posted in International Litigation

At a round table there is no dispute about place –Italian Proverb
Every company, whether in the product or service business, depends on its suppliers. In today’s highly globalized business environment, it is likely that at least one of these suppliers is located overseas.
While reducing costs is the main motivator for companies to source value chain components abroad—and that’s a good thing for any profit-generating enterprise—this all too frequently results in disputes with suppliers. And that’s not surprising.
It’s natural to assume that distance and cultural nuances will sometimes cause a minor disagreement–whether over price, quality or delivery terms–to flare-up into a serious dispute.
“So what,” one of my clients once told me, “we’re still getting fantastic margins.”
“Be careful,” I advised the client, “litigation can easily erase those ‘fantastic’ margins. Worse yet, your back- up suppliers may get wind of the dispute and cut you off.  Now you’re left scrambling for a new supplier while your customers are screaming for their orders.” Good luck with that.
Unfortunately, this client cared only for short-term profits and overlooked how important it is to form long-term relationships with suppliers. This brings me to an excellent article in Entrepreneur that does a great job with driving this point home.
The article,  Build a Good Relationship with Suppliers, correctly points out that many business owners seem to get the supplier issue backwards. “They think that because they write the order, they’re in the dominant position and can exploit it with unreasonable demands.”  This is exactly the kind of thinking that almost always results in out-sized disputes

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