Suppliers looking to have Amazon as a client will have to release the right for Amazon to buy big stakes in their companies at potentially high discounts compared to market value, according to the Wall Street Journal.
The retail giant struck at least a dozen deals with publicly traded companies where it gets rights, which it calls warrants, to buy the vendors’ stock in the future at what is presumed to be below-market prices. Amazon has made similar deals with about 75 privately held companies over the past decade.
All told, the stakes and potential stakes amount to billions of dollars across companies that provide a variety of products and services, the WSJ reports. In some cases, the deals make Amazon among the top shareholders in these businesses. The deals can benefit suppliers by locking in big contracts, but some executives said they felt they couldn’t refuse Amazon’s push to buy the stock.
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“Amazon is playing with regulatory fire with the SEC if it invests in publicly traded suppliers that subsequently announce Amazon as a customer, which raises the stock price and Amazon’s investment,” said Pierre Mitchell, Spend Matters’ Chief Research Officer. “However, Amazon asking critical suppliers to sign anti-takeover clauses — that gives it the right of last refusal to keep an Amazon supplier out of a competitor’s hands — is standard fare for smart procurement organizations.”
Despite serious challenges facing automakers and their suppliers in the last year, four of the six major US and Japanese automakers improved their scores of the North American Automotive OEM — Supplier Working Relations Index (WRI) study.
The WRI survey assesses specific supplier feedback on attributes contributing to a purchasing organization’s throughput effectiveness. Toyota (347), Honda (316) and General Motors (289) were the highest three scorers this year. Ford (249) and Honda (211) rounded out the top five.
“Without a doubt, the industry went through a trial by fire this past year, but seeing the positive results for four of the six automakers was a surprise in many ways,” Dave Andrea, Principal in Plante Moran’s Strategy and Automotive & Mobility Consulting Practice, which conducted the study, said in a press release. “Typically, a crisis is not the time to improve established relations, but the OEMs’ efforts to enhance mutual trust, transparency and communications moved relationships forward through the worst of Covid and the stop and restart of their operations.”
New research from Accenture found that only 4% of supply chain leaders said they are “future ready” after the pandemic, according to the website VentureBeat.
Accenture and Oxford Economics surveyed 1,100 executives globally, 44% of whom were C-level or equivalent. Among many findings, the research found that 81% of leaders said the pandemic was their organizations’ greatest test. Meanwhile, 34% of supply leaders expect to be “future ready” by 2023.
Future ready is used as an indicator of the highest level of operational maturity. The study found that companies that are future ready are the most stable and successful long term.
“The pandemic exposed just how much the supply chain can make or break a company’s success,” the report states, VentureBeat said. “It has revealed hidden vulnerabilities. And in the process, the crisis has moved Chief Supply Chain Officers (CSCOs) to the forefront of change. The days when their sole focus was on cost management are gone.”
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