Epic Supplier Fail on the World Stage

What do you call a supplier that is highly intertwined with your operation, refuses to accept your contract terms, and retaliates when they are not paid on time?

If you are the Russian military, you call that supplier PMC Wagner.?

On June 23rd, the Wagner Group, a private militia operating on behalf of Russia in the war with Ukraine, staged an armed rebellion. Wagner founder Yevgeny Prigozhin is not the kind of figure I would typically side with, but watching his fighters roll towards Moscow… I couldn’t help but hope they would make it.

The conflict was short lived, but it seized the world’s attention. Whether we all realized it or not, what we were watching was a buyer-supplier relationship gone extremely wrong. From pressure to sign an undesirable contract, to Russia’s failure to pay Wagner on time, and the tight coupling of the two operations, any procurement professional could have predicted that this situation was headed for trouble.

Russia works with the Wagner Group for many of the same reasons companies hire third party service providers:

• Wagner’s specialized training advances Russia’s military objectives
• Efficient operations make Wagner faster and more effective
• Working with Wagner allows Russia to distance themselves from the less pleasant aspects of the ‘work’

Read the full article or listen to this week’s episode of Dial P for Procurement for more:

To this day there is a great degree of uncertainty about the future for Prigozhin and his fighters, and Putin has gotten a stark reminder of why it is important not to sole source a critical service.

Vladimir Putin and Yevgeny Prigozhin are both bad actors, but in this kind of situation, we may find ourselves backing the less bad horse. Nothing that is simple is real, and nothing that is real is simple. As with so many other geopolitical events, there are lessons we can learn from the dispute between Russia and PMC Wagner:

• When you find yourself at odds with a strategic supplier - and you are their only customer - prepare for a very bumpy operational ride
• Playing contract hardball is a risky game for everyone involved
• Not paying suppliers on time is a good way to find yourself under fire (literally in this case)

Procurement and supply chain are at work in private industry and on battlefields around the world. They channel the most basic motivations into familiar structures… revenue, demand, contract terms, relationships. Time will tell whether this buyer-supplier relationship can be saved, but it should come as no surprise to procurement professionals that the conflict reached this point.