I recently delivered a “What Suppliers Say About Buyers” partnering presentation to the National Association of Chemical Distributors at their annual meeting. A couple months before the meeting, I visited the convention chair, Pat Marantette, at his Southern California business, E.T. Horn Company, to learn more about the industry. One of the things he told me was that he was more concerned with the relationships with his suppliers than the relationships with his customers. He went on to explain to me that without his suppliers, he was out of business.
In thinking back on the visit, asking how important are suppliers to your business success is an important question. The following is excerpted from my latest book, PartnerShift–How To Profit from the Partnering Trend. I believe you’ll be asking yourself questions in reference to the relationships you enjoy, or do not enjoy, with your suppliers.
At the Building Service Contractors Association International’s 1997 Chief Executive Officer Seminar in Los Cabos, Mexico, one of the suppliers to the industry was assigned to present a presentation based on what the suppliers in general said they did not like about the contractors, their customers, actions. While Rob Kohlhagen, senior market development manager at SC Johnson Professional delivered an exceptional presentation, I’m not sure he ever forgave me for assigning him the task. Admitting the comments came from only one industry, I believe they are universal, as they have applied to most of the industries that I have counseled or studied.
Power manifests through knowledge. It is important to know what your suppliers have to say about you. Completing Relationship Value Updates are important, as they will help you to avoid some of the following problems and open a conduit for communication. Remember, you can learn from another industry’s problems. Below are listed the three general areas of complaint from the contractors’ suppliers. Also there are some of the specific comments offered about the contractors. Their comments point out universal issues that suppliers have with their buyers. Most will apply to your industry. If you explore issues you might have with your own customers, there is a good chance your suppliers could have similar issues with you.
Fear of commitment
“They are not willing to single source but still want our total bundle of value-added resources at no additional cost.”
“They focus on reducing price rather than reducing cost.”
“They like to shop around regularly to satisfy curiosity . . . they are afraid that we will abuse the relationship.”
“They want direct prices but local service.”
Operations level support
“We get commitment from top management but the program gets derailed at the operations level.”
“Top management is reluctant to mandate changes to operations . . . they try to build consensus but it doesn’t happen.”
“Operations people have their ‘personal favorites’, old recipes they swear by that they will do anything
“The partnership is conceived at the executive level but the lower level departments are never convinced that it is in their best interests too.”
“Everyone is so busy we only communicate when there is a need for fire fighting . . . hence the relationship takes on a negative tone over time.”
“We never discuss mutual opportunities . . . it’s always, “How do we fix what isn’t working?’”
“We talked about the importance of communicating at all levels: executive, operations, purchasing, training, risk management and quality assurance but there is no structure established to make it happen . . . so it doesn’t.”
“The chemical supplier cannot partner independently with the building service contractor. There is an interdependence between the chemical and equipment and supply manufacturers but there is no communication link established between us.”
Interdependence is an idea that carries much power. From the Harvard Business Review, July/August 1994, “Active collaboration takes place when companies develop mechanisms, structures, processes, and skills for bridging organizational and interpersonal differences and achieving real value from the partnership. Multiple ties at multiple levels ensure communication, coordination, and control . . . more communication than anyone anticipated is necessary.”
Thomas Gale, editor at Modern Distribution Management, has his opinion about the integrity of some customers. From the November 10, 1994 issue, “And while many customers are talking about integrated supply partnerships, there are (and will always be) customers that are ultimately seeking price reductions, playing one distributor off another, without a willingness to explore how a true partnership can save money for the customer while providing a fair profit for the distributor.”
Developing a conduit for communication is not difficult but frequently overlooked in many industries. The Internet makes this even easier. Some industry associations are providing this service through members’ only sections on their web site. More trade and professional associations are helping to create this type of multi-function participant forum, but not enough. This area is a tremendous opportunity for associations to add a very high-level of value for their members. Continue the dialogue with all stakeholders in your business.
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The Member ROI Guy: Ed Rigsbee, CAE, CSP
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