Monday, August 13, 2012

What's 20120768 minus 20120755? Weakness.

A firm's leverage with a supplier is often based on how much of the supplier's revenue pie the firm represents. This leverage can express itself in ways such as bargaining power and prioritization.

Since this leverage comes from the point of view of the supplier, the firm may not directly know its relative importance. One proxy is to look at the invoice numbers that the supplier sends you. If the numbering scheme appears sequential then you have an idea of how many other invoices the supplier has sent out since your last invoice. Conversely, a shrewd supplier should obscure its invoice numbering scheme to minimize this leak.

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