As published in “Southwest Florida Business Today”, May 2021
Until recently, the term “Supply Chain” was not a commonly heard business term. However, as the world has become more competitive, the importance of reliable, cost effective suppliers has become recognized as a critical success factor for many businesses. Unfortunately, many suppliers are still neglected as part of the business management process, often derisively referred to as “vendors.” This is a big mistake. Suppliers are a key part of your business and deserve the same attention, respect and active participation from you as other aspects of the business.
When choosing suppliers, there are a few simple steps which will help make the relationship more successful for both parties. First, describe the supplier’s responsibilities in detail. Try to keep subjectivity out of your description. Words like “large,” “often,” and “high quality” are subject to interpretation and can lead to misunderstanding and conflict. Be as specific as possible. Review these requirements with the potential suppliers and make sure you both understand what is being requested. Be sure to include other important details like schedule, delivery requirements and payment terms. Next, decide what you will use for the selection criteria and share it with the suppliers. What is most important in making the selection – cost, quality, or delivery? Sometimes it’s a combination of these things, so be clear. This helps you to confirm your own needs and helps the supplier to develop an appropriate proposal for you. After you have reviewed proposals and chosen a supplier, contact the other participants, thank them, and describe constructively why they weren’t chosen. You never know when you might need them.
Once the supplier begins the work, stay in touch. Monitor the supplier’s performance and provide constructive feedback. In many companies, suppliers are rated on a standard “scorecard.” These results can often influence whether the supplier will be awarded a follow-on contract or win new business. Surprisingly, some companies neglect to share this information with the suppliers, so the suppliers have no idea that they might need to change their approach until it’s too late. In sharing your assessment with the suppliers, you get the opportunity to see if there are any mistakes in your data (it happens!), and the suppliers have the opportunity to change and improve their performance. Everyone wins.
Treat key suppliers as part of your team. Meet with them regularly. Get to know them. Share appropriate parts of your business forecasts, future needs, and strategy so they can adapt their offerings to meet your needs. If you can, give them a tour of your operation and show them where their product or service is used and what role it plays. This can be very motivating for the supplier. In one of my businesses, we manufactured critical elements of a military fighter jet. We invited a group of the aircraft’s pilots to the factory to explain their mission and how the aircraft is used. They showed short films of the aircraft in action and explained how crucial our parts were. Then they handed out simple giveaways to the factory workers to remind them of the aircraft. The workers were talking about that visit for years.
Another suggestion. Listen to your supplier’s feedback – when a supplier understands your business and their role in it, they can often suggest significant improvements. You will never get that advantage by holding suppliers at arm’s length as “vendors.”
As your relationship evolves through the course of business, you expect your suppliers to perform and treat you well. Do the same. I was always amazed and disappointed with how many customers of mine would hold onto a scheduled payment beyond the contractual deadline in order to make their cash flow forecast for the quarter or the year. They never asked, they just did it. If you need some help from a good supplier, ask. And offer something in return. This will motivate them to stay engaged and help you.
If you think about it, these principals are applicable to suppliers to your business as well as your home. Almost every business, regardless of their position in the supply chain, has both customers and suppliers. If you treat them both with respect and commit to a collaborative working relationship, your business will be much better off.
Copyright 2021 Seabreeze Associates, LLC
Mind Your Own Business. No One Else Will. 