On the face of it, defining a good solid Supplier/Customer relationship is easy. The supplier provides the right products/services at the right time at the right price. But if you dig a little deeper there is a distinct psychology that reflects a more complex and less obvious interaction between the two parties.
Good purchasing practice is an integral part of any businesses success and few factors are as vital to ensuring sound purchasing methodologies as selecting quality suppliers. Indeed finding and maintaining good suppliers can be an invaluable tool in a business’s quest for growth and success. It might well be fair to say that a business can only be as good as the suppliers with which it works.
For many involved in procurement their suppliers are an important factor in their planning and strategy. Suppliers are often regarded as a secret competitive weapon, their hidden resource, their competitive edge so to speak. The advantages of this can manifest itself by better pricing and delivery times and frequency, to providing the scope for considering innovative and cutting edge practices.
These improvement possibilities will not be developed without the involvement and buy in from business owners and executives. On the plus side however many leading companies will only develop strategies with input from their supply chain, emphasising shareholder value creation, revenue growth, cost effectiveness and establishing specific programs with key suppliers in order to succeed. Wherever possible business leaders will leverage suppliers to maximise their own product competitiveness, going far beyond the narrow focus of just pricing and cost reduction.
So a business’s positive relationship with a supplier is touted by management gurus as being key to growth and subsequently profitability. What then are the barriers to developing this Utopian situation?
- Attachment of greater importance to other initiatives
- “Comfortable” relationships with an existing supplier
- Inter departmental differences of opinion on the way forward
- Doubts about the benefits of developing such relationships
- Poor monitoring and control systems
- Inexperience in managing improvement programs
- An inherent general distrust of suppliers
Businesses that tick all or even some of these boxes typically cling to old school practices that centre on legitimate concerns about price but at the exclusion of all else.
There are generally 5 areas that determine a supplier’s involvement in helping a business compete.
- Improvements in product/service, through design, technology or ideas.
- Improvement in product/service quality.
- Improvement in “speed to market”.
- Reduction in cost, not through discounting exclusively but by streamlining work processes, inventory management, using less expensive (not at the cost of effectiveness however) components.
- Improvement in overall customer satisfaction,
How then do you evaluate a supplier or benchmark one against an existing service provider? Consider the following when making a call on who to partner with.
- Commitment to quality – not surprisingly product quality is viewed as an essential when selecting a supplier.
- Cost competitive – keen pricing is a huge factor especially for smaller businesses with possible cash flow issues.
- Communication – suppliers who are never available or lack an open door approach to communication should be avoided at all costs. The frustrations of trying to deal with such suppliers can assume debilitating dimensions.
- Timely service – your strategy most likely includes schedules which are based on receiving deliveries at agreed upon times. Uncertainty of delivery is a significant issue in your operation and your ability to sleep at night!
- Flexibility and Special services – many purchasers really appreciate those suppliers that go the extra mile (or two!). This can include after hours accessibility, training or even stock support.
- Production capabilities – a supplier’s capacity for program management and production should be considered, including its ability and willingness to integrate design and manufacturing functions.
- Financial stability – buyers embarking on long term deals will feel much more comfortable with a supplier that can demonstrate financial security, longevity and a solid background
- Logistics – supplier capabilities in this area include locations, transportation capacity, sourcing expertise and “just in time” protocols.
- Inventory – how well is the supplier’s stock managed, days cover, local vs overseas origins, plus a breakdown in terms of “stock out” occurrences.
So in closing, the relationship between supplier and customer should never reflect a “them and us” attitude. The most productive scenario for both parties is formed when both are in sync with each other’s goals, objectives, strengths and an understanding of any potential weaknesses.
To our existing customer base we thank you for your incredibly loyal support and for partnering with us over the years…to potential new customers let’s meet to discuss how Ace Retail Solutions can help grow your business with our great products, great people and competitive pricing.