Wake up call

 

The demise of the telephone company Phones 4U illustrates some harsh truths about operating in today’s business climate.

To the outside world the company appeared to be a successful entity. At the time of going into administration the company had a turnover of over £1bn, EBITDA of £105m for 2013 and significant cash in the bank.'

However a closer scrutiny of the company showed it was heavily burdened with debt and reliant on its suppliers to ensure its long term survival.

Once Phones 4U lost the support of their suppliers they were essentially finished. Without product to sell there was no business.

Although a rather extreme example it does highlight the need for companies to acknowledge that it is a two way street. Notwithstanding the importance of the buyer (end consumer) it is paramount that dealings with suppliers are maintained on a fair and equitable basis.

Many companies rely on operating on a “just in time basis” which can leave them particularly vulnerable if there is any disruption to the supply chain.

For any business relationship to grow there has to be mutual reciprocity and understanding of the other party’s situation.

Be it constant delay in payment or unreasonable requests it is not surprising that suppliers decide that some business accounts aren’t worth the candle. When a supplier decides that enough is enough there is not always a readymade alternative