Companies may need to fire problematic suppliers or risk losing customers, researchers say

Companies may have to take action against suppliers causing issues to prevent a supply chain scandal otherwise customers will leave, research from the University of Surrey said.

Businesses will benefit from firing problematic suppliers, as customers could depart in case of a scandal. Customers expect companies to effectively handle issues and to take action.

“Our research shows that companies need to do something, and that could include parting ways with a supplier if there’s a scandal,” Professor Sabine Benoit from Surrey Business School said. “Customers will blame major firms for supply chain scandals, and this inherited blame will affect whether they buy from the firm in the future.”

Supporting suppliers amidst wrongdoing is a costly and time-consuming act for companies, with firms having the option to monitor or fire their suppliers. Customers’ buying decisions could be impacted by that.

“Our research has found that taking one action, either monitoring and supporting suppliers to do better or moving on from them, will help to build trust and confidence in the major firm but purchasing intention only returns to 75% of what it was before the scandal hit,” Benoit said.

“The best option if a scandal does hit is for companies to double-down on their response by sacking the supplier who caused the scandal and work to support their remaining suppliers, then consumers’ trust will start to rebuild, resulting in the best outcome possible – with purchasing intention rising to 85% of what it was before the scandal hit.”

The research was conducted over five years by authors in the UK, US, and Germany.