ApplianceAdvisor
Electrolux Letter to Suppliers Requiring 21% Price Cut
Feedback from our readers
April 19, 2005
Industry Insider but Not a Supplier
This is a simple case of Electrolux throwing shit against a wall to see what
sticks. Think about it: Thousands of suppliers received this letter,
representing hundreds of millions of dollars worth of material. Depending on the
current position of strength each supplier has, some may be inclined to concede 5, 10, 15% just to
buy favor or cover their ass. Even just a few "idiot" suppliers con'ed
into doing so will have a collective impact. High tech OEMs and contract
manufacturers have been doing this for years. Just send out a letter crying
about the terrible state of competition, material costs, etc., ask for a
donation, and pray. It takes 5 minutes to write such a letter and 1 second to
hit send. If nothing comes of it, no big deal. It's kind of the opposing
strategy to "allocation." Yes, allocation is often a sham, as well.
Unfortunately, this type of strategy preys on the smaller "mom &
pop" supplier who doesn't have the leverage of larger suppliers.