Israeli startups often rely on a tight inner circle of suppliers comprised of friends and family. They usually wait for the big pay day that comes with the ‘exit’.
Once the company has been acquired and we start checking the supply chain we often discover that a number of suppliers aren’t delivering as they should be. They are often late, there are a large number of returns and the cost is not as competitive as it should be.
When acquiring companies explore the supply chain there are often told by management that this is how things are done and ‘we’ve been working with them forever, let’s not rock the boat’ or ‘we have a special relationship with them…’. Acquiring companies often neglect to dig deeper and as a result inherit a company that isn’t clicking on all cylinders and is not reaching their potential as well as operating in a state of inefficiency.
The underlying mood is that there has been a huge injection of capital in the company and ‘let the spending begin…’. It’s not uncommon to see a spike in supplier costs immediately after a company has been acquired as there is a common sense of ‘everything is allowed’.
In our experience, you need an unwavering attitude and an utter lack of fear in confronting the different suppliers and be prepared to negotiate the best deals. You can either continue working with old suppliers and bringing them on board with the new plan, and if that doesn’t work, you need to be ready to replace the different cogs in the supply chain, re-open contracts and create new tenders and source new suppliers that are aligned with the new vision and who are ready to deliver.