Friday, November 21, 2008

Renew Commitment to beat the HEAT

The economic slowdown has prompted a fear factor towards vendor relationship in such a way that no entity can be fully trusted to the commitment they make. At the present scenario, nobody is sure about the others credential; hence it's essential to have a renewed contract with stringent clauses protecting the contract.

If you have pending contracts, where the contract is not been protected and monetary involvement is there in the component of advances; than it's essential to carry out physical verification at the site and try to renegotiate to protect the contract in the form of minutes of meeting; so that the contract is safe to carryout.

The reason behind all this renegotiation and renewing the contract may be summed up as follows -
  1. You never know the internal strength of the vendor to honor the commitment.
  2. Liquidity Crunch is there at all segment of business at this moment, so the demand from the vendor may not be in the line of your contract but to cope the liquidity crunch what they are facing.
  3. There may be cases of overcommitment as the vendor is not sure about your commitment so that they want to be safe with the execution of the contract/order and collect the payments, etc. well in advance.
So, authenticate the commitments, review all the contracts and plan the line of action and be safe to cope the slowdown. In this scenario, it's wise to minimise the inventory, plan contracts which are utmost essential, function at the optimum level, give focus on in house maintenance and most importantly keep going. Also one should not look at very high profit but at an optimum level at this pont of time!..

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