How to Reduce High Costs of Changing Vendors?
You work with several main vendors, and you invested a lot of time and money in finding these suppliers and maintaining the agreements with them.
You also invested a lot of development resources, and the components of these vendors are necessary for your product; indeed, they are an inseparable part of it.
Now the agreement with one of the suppliers is about to expire, and you understand that in addition to the short-term loss of the vendor, you are going to have to invest a lot of resources in finding an alternative vendor.
Is this inevitable?
In a global high-tech company in which I served as a legal consultant, I recognized that the company had a significant dependence on several main vendors that supplied the company with important components for its product.
Beyond the challenge of ensuring that users could continue using the product even after the expiration of the agreements with the vendors, I also recognized that the company would be forced to invest a lot of money and meaningful time in finding alternative vendors in the future after any expiration.
This would divert resources that the company preferred to devote to other areas in the present and thus the company had an incentive to postpone the job of finding alternatives in the future.
I built a smart mechanism into the agreements with these vendors that eliminated the dependence of end users’ right to use the company’s product on the agreement with vendors.
I established another mechanism that prolonged the capability of the company to keep using components even after the agreements with the vendors expired.
The outcome was the extension of the period in which it was possible to use the components, and the postponement of the deadline for finding alternate vendors.
As is well known, a payment that is postponed is a payment that is saved.
These measures helped the company save money and meaningful time.