SMU Data and Models

Steel Buyers Basics: Trust but Verify

Written by Mario Briccetti

Last week we started a discussion on the kinds of ethical issues that buyers and salespeople are exposed to in their everyday activities.  The most difficult ethical issues arise because Buyers and Sellers have a fundamental tension in their relationship; they are counterparties negotiating deals where each wants the most for themselves while giving up the least to the other.

A buyer sees it as his job, even his duty, to use every tool available to negotiate the most favorable deal possible.  In pursuit of that goal buyers may stretch (or spin) the truth as in the following examples:

Stating that they have competitive prices that are less than what they really have.

Promising more volume that what they can really offer.

Denigrating the seller’s quality or delivery performance when in fact they are satisfied with it.

Promising to pay on time (when they know their company will not do so).

Threatening the salesman with consequences that are never going to happen.

On the flip side, sellers often spin the truth in their own way during a negotiation:

Stating pricing being given is the best in the market when they know it is not.

Promising quality and delivery performance that cannot be achieved.

Misrepresenting their product.

Denigrating a competitor.

Threatening the buyer with consequences that are never going to happen.

Sellers and buyers in a negotiation who push the truth into exaggeration might not be violating the “Buffet Rule” about actions being reviewable by an informed public.  However these types of actions erode trust.  Buyers and Sellers should remember if the counterparty loses trust, even if you get a great deal today, in the long run both sides lose.

In response to last week’s article the issue of billing errors was raised.  There is no question that sellers should be informed of such errors. Of course, iif you are a  buyer it is perfectly fair to promote your honesty in the next negotiation and try to obtain a concession for it.

Also, in response to last week’s article, the question of product representation was raised.  Unfortunately, there are sellers out there who will represent steel as more than what it actually is (example G90 instead of G60).  Of course such behavior is unethical.  Buyers should take Ronald Reagan’s advice – trust but verify.  Short of having the steel lab tested, periodically ask for the steel mill’s certification (or cert) from your supplier.  All steel coils have unique serial numbers and are traceable to certifications that list all the details about the steel’s properties – including coating weights.

The one thing that we have found is that buyers who are unprepared and over-trusting are easy to take advantage of. Part of the buying responsibility is to verify your company indeed receives what was ordered.

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