The way we do business has changed overnight and parts of the system are breaking because of it. Suppliers are most vulnerable to this sudden change. Guesthouses, travel agents and conference venues that rely on corporate patronage have had the rug pulled out from under them. Others, such as lawyers, consultants, catering and courier companies are also hurting as the corporate machine hunkers down.

We are in a no-win situation. Everyone is compromised, but not everyone has the same ability and reserves to survive the crisis. In many instances, this survival is dependent on big business that has, until now provided, the lifeblood for smaller ones. The intuitive response by companies in times of uncertainty is to put the brakes on all non-essential activities; work done today to ensure a more sustainable tomorrow is suddenly less vital. On the other hand, actions to improve cash reserves are top priority. The corrective action will naturally focus inward – on the wellbeing of the business, but without regard of the knock-on effects of decisions taken to others in the value chain.

When partners pay the price

Consider an action by Booking.com to offer refunds to customers who had opted for discounted but non-refundable guesthouse bookings. “We expect you to refund any prepayment and waive any cancellation costs (fees, expenses and/or other amounts) in situations where the guests/travellers requested cancellations as a result of the Forced Circumstances (FC),” the company explained in a notice to its affiliated guesthouses, sent on 18 March 2020.

The FC impacts guesthouses located in areas severely affected by Covid-19. It also impacts any reservations made by individuals who have recently been to areas severely affected by the virus. So, while South Africa is not severely impacted at this stage, any foreign guests from places like Italy can get full refunds from South African guest houses, regardless of the original booking conditions. What are the consequences of this for guesthouses already critically threatened by cancelled bookings due to the virus outbreak? Booking.com refers to these guesthouses as partners, but where is the partnership if unilateral decisions are taken under the guise of Force Majeure, without any compromise or consultation? Why was there not an opportunity given to postpone the booking – or meet the cancellation costs half-way?

There are other examples where co-operation and agreement are being adopted as the way forward, such as pre-booked conference venues that are not enforcing rights but instead negotiating alternative dates, or consulting assignments where e-conferencing engagement is replacing physical workshops and meetings. Alternative solutions may not be as good as original plans, but can still get the job done.

Opportunities for growth; not demise

Another multinational online business, Uber Eats, responded to their supply chain with creativity. Their marketing campaign to provide people working from home with lunch and dinner, launched on 17 March, aims to protect their drivers and partner restaurants, both financially and health-wise. “We expect that meal delivery could also help support restaurants who may be seeing reduced sit-down guests where social interactions and gatherings have been discouraged,” they explained in an email on Wednesday. They also detailed ways in which their delivery staff would be protected when making deliveries and stated they would provide financial assistance to any Uber employee impacted by Covid-19.

Another example is the National Arts Festival in Makhanda. The “National Arts Festival will be going completely virtual… (which) will mean that the festival can continue to support artists and the arts in 2020, by presenting work within a digital space.” Evident here is stakeholder engagement and a meaningful discussion, where the organisers created a plan that would provide countless theatre production companies with a financial lifeline. This creative response has the added benefit of improving accessibility for people who may not have been able to travel to Makhanda to attend the festival in person.

These three examples show how suppliers and partners can easily be shunned or supported through effective engagement processes that seek to find solutions for all parties – and not just one company or organisation.

The power to protect your suppliers

Those with influence over their suppliers would do well to exercise the power they have to honour existing agreements to the extent possible, for instance by:

  • Agreeing to alternative work methods, delayed delivery and rescheduling of work
  • Continuing to pay contractors for monthly services – partially if need be if the scope of work has to be adjusted
  • Not delay payments – suppliers are likely more sensitive to cash flow constraints than large business.

It isn’t necessary in times like these to be a corporate bully by unilaterally and unequivocally pursuing your legal Force Majeure right. Consult with those exposed, be reasonable, perhaps agree to share some of the pain, see if you can work something out. This crisis will end. It is not in anyone’s interest to come back to an obliterated supply chain when it does.

Written by Nick Rockey and Matthew le Cordeur

Photo by Pixabay