Supplier Management as a Weapon: The Dark Side of Business Tactics - Temu vs Shein

With the market share of e-commerce continuing to rise, the supply chains that weave the fabric of global trade are under increased pressure and scrutiny. Whilst brands such as Shein are able to mask themselves through an exclusively online presence, nurturing supplier relationships within these organisations fortunately still abide by the same rules and principles. Collaboration and mutually beneficial partnerships are widely considered the foundations of good Supplier Relationship Management, however a recent news article sheds light on the current situation within the fast-fashion e-commerce industry where these ‘relationships’ have been weaponised through intimidation and ‘mafia-style’ tactics. The case of Temu suing Shein serves as a stark reminder that the power dynamics between businesses and suppliers can still be used to manipulate the free-market, and are ultimately bad for business.

The Allegations Against Shein:

The news article from 1News (Dec, 2023) reports that Temu is suing Shein, accusing the e-commerce giant of employing ‘mafia-style intimidation’ tactics against its suppliers in order to thwart competition and limit their growth within the US market – with some suppliers allegedly being detained at the Shein offices for up to 10 hours. Whilst Shein has violently refuted these claims, the allegations paint a picture of a company leveraging its position of power to coerce and manipulate suppliers.

Supplier Management as a Weapon:

Not only does this case demonstrate the criticality of Supplier Management in increasing bargaining power, but it also demonstrates the consequences of when it is not done correctly. Whilst effective Supplier Management is traditionally seen as a means to optimize processes, reduce costs, and enhance collaboration, the darker reality portrayed in this news article suggests that undermining principles and ethical conduct can result in irreparable harm.

The long-term consequences may extend beyond legal battles and result in tarnished reputations and eroded relationships. Introducing hostility into these relationships will prevent the development of any ‘customer of choice’ dynamic that has been established, in turn hindering innovation and willingness to cooperate in a true sustainable partnership. Within an increasingly conscious consumer base, pressure to conduct ethical business is also an external factor. Companies that resort to coercive Supplier Management tactics may find themselves facing a backlash from consumers who demand transparency and fair play, materially impacting their brand and market standing.

There is also a significant impact on suppliers that are caught in the crossfire of such alleged tactics. Intimidation and strong-arming can lead to compromised business relationships and resulting financial instability. Small and medium-sized enterprises, in particular, may find themselves disproportionately affected, lacking the resources to withstand the pressure exerted by larger entities.

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Ethical Supplier Management:

The allegations against Shein highlight the importance of creating an environment where suppliers, regardless of their size, can operate on a level playing field. Abiding by best-practice behaviour is pivotal in counteracting the potential misuse of Supplier Management as a weapon. State of Flux recommends using elements of their trusted methodology:

1. Voice of the Supplier exercise:

Fostering a culture of transparency and open communication within the supply chain is the first step in creating healthy supplier relationships.  Through a Voice of the Supplier exercise, an organisation will gain an overview of their supplier perceptions, and highlight any strengths or problem areas. This approach, when done correctly, will show suppliers that their opinions matter and will inevitably lead to stronger working relationships.

2. 360 Relationship Assessments and Joint Business Planning Workshops:

As an alternative to the intimidation tactics described above, joint business planning will yield the desired results in a sustainable manner. Through open and honest collaboration, a customer of choice dynamic is possible, which can result in commitments such as improved innovation and preferential pricing. Suppliers are more inclined to negotiate fairly and provide their best resource if a transaction is mutually beneficial.

3. Supplier Summits:

Holding a Supplier Summit provides an outlet to clearly communicate expectations and work collaboratively with suppliers to address challenges. An open-book approach will be more successful in establishing long-term partnerships than ‘under the table’ tactics. Supplier capability is frequently under-utilised, and providing the platform to share ideas amongst industry peers is a mutually beneficial activity that can result in competitive advantage.

5. Supplier Diversity:

Embracing supplier diversity will promote a healthy and competitive market. This ethical practice aims to not only bring diversity of thought/ideas to an organisation, but also avoids perpetuating an environment where a few dominant players can exploit their position.

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Conclusion:

The allegations against Shein underscore the importance of reevaluating the role of Supplier Management when faced with real business challenges or opportunities. Supplier relationships should be characterized by fairness, transparency, and a commitment to ethical conduct. By prioritizing these principles, businesses can contribute to a healthier and more sustainable business environment, one where Supplier Management is a tool for collaboration and growth rather than a weapon of coercion. Everything you need to know to get started is perfectly summarised in the latest edition of the annual Supplier Management Research Report, which you can download free of charge. Most professionals take the next step by joining an SRM Advanced Training course to learn best practices from industry experts.

If you have any questions or would simply like to connect, please contact us at enquiries@stateofflux.co.uk. 

Author: Scott Sears, Manager Consultant at State of Flux, based in London.

Co-Author: Cameron Jeffrey, Consultant at State of Flux, based in London.