Strategic Planning - Part 2 - suppliers
Updated: Nov 3, 2020
As a part of an overview of Strategic Planning I have decided to break down various components of businesses into bite size chunks and where possible create a process to help you monitor performance and drive efficiency. If you want to know more about processes/systems
Over my 40+ years in business I have been surprised at the the number of times I have come across situations where the supplier is mistreated by the client. What makes it all the more amazing is the fact that we are all suppliers to someone or other and would not like to be treated in this way. This form of bullying is used for a number of reasons but more commonly to get a price advantage, extended credit or just an abuse of position. This invariably leads to a toxic relationship fuelled by resentment and ultimately failure where the supplier decides that they have had enough.
I remember experiencing this in the early days of business where over the course of two or three years we had managed to bring on board six clients who were becoming more and more difficult to deal with but were endured because of their perceived volume of work. I was also aware that when changing strategy it is important to have the correct information to back up your decision. It must also be said also that there is a time in the development of every business where you must stand up for yourself and I had reached that point.
Before acting, I decided to track the behaviour of these individuals carefully and so instructed my team to record every request, no matter how small, track all time from simple phone calls, to long discussions to time spent trying to get each invoice paid. Over the course of the following six months we created a profile for each and what an eye opener that exercise proved to be which helped us understand;
project value versus time and materials used - real v perceived
number of times projects were put on hold and the costs associated with it
unrealistic demands for work to be completed at short notice which inconvenienced other clients
requests for discounts for minor issues usually created by their demands
average time it took to get paid
Once armed with this information I scheduled a series of meetings with each of the parties to discuss our new arrangements. New arrangements, what new arrangements was the typical response? Starting immediately our fees will be increasing by 70% across the board. You can imagine the reaction where there was a lot of huffing and puffing but in the end four remained as clients, four more than I anticipated. As a bonus to the additional fees we had a new dynamic in our relationship where we understood who needed who the most. Naturally, we did not exploit this but we now had a proper relationship which was to the benefit of everyone.
But lets expand this subject to talk about the huge benefits that become available once you create a healthy relationship with your suppliers. I discovered that by going to their premises and meeting with people, not just management but those on the shop floor new possibilities opened up. We were able to sit down, listen to their challenges and then articulate ours. Now I have deliberately put us, even though we are the client in second place because once you are open to letting others talk first you now have a willing audience who will listen to your challenges.
Suddenly, we had a new team who understood our challenges and were proactively looking to find new ways of solving them. We had a genuine partnership arrangement where everyone was a winner.
So lets look at a simple process to help you find the right fit, create the sort of relationships that have real meaning and allow you to grow your business.
Identify the type of supplier you need for this particular product or service - large multinational who offers a tried and tested solution but will be inflexible to customising it for you or a more bespoke/niche supplier who will value your business and respond accordingly. You will have different needs for different products/services so take time to understand your requirement in this instance.
If you have selected the multinational option, then just monitor performance across criteria such as delivery, reliability, response to issues, value for money and anything else that you depend upon and act accordingly. You amy be forced to move but you will be armed with information that helps you make a better choice.
If you have selected a niche supplier which you have vetted, then I suggest that you meet with them at their premises to learn about each others challenges and to put names to faces. This simple act will repay you many times over and allow you to have honest conversations when issues arise.
Make sure that you have more than one contact in the organisation and that they have more than one contact in yours. This will smooth over potential issues with changes in personnel.
Monitor performance across criteria such as delivery, reliability, response to issues, value for money and anything else that you depend upon. This needs to be done regularly (every 3 months) in a consistent way and logged. You cannot rely on memory or react to just one instance. With a log you have detailed notes of what happened and when, which allows the supplier to respond in a more focussed way. If the issues continue you can use the evidence to look for discounts or if more problematic, source a new supplier explaining why you needed to move.
Make sure that you include your employees in the review process. You may not be getting the full picture of the impact this supplier is having on your business which may be be positive and/or negative.
As you can see this is a simple process that if included in your Strategic Plan will help you evaluate a key component of your offering. When put in place you now have another benchmark with valuable information updated at regular intervals to help you with the smooth running of your organisation.
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