John Genge lays out his top tips for making the most from your partnerships
There is a lot of brave talk in this world. Some speak of nailing down suppliers, some of hammering down prices and only recently we heard of farmers, disgusted over the reduction of their wholesale milk prices, causing blockades outside dairies and threatening to pour milk down the drain. One way or another, there is a trend towards adversarial relationships with suppliers – but is that good?
If your relationship is short term or you do not value the relationship, then such a strategy is fine. However I would argue that in the long run you will pay more for your supplies, have less flexibility, poorer reliability of supply and not be able to exploit synergistic advantages. Why? Because you will be working on your own and not with a supportive partner.
I recall an annual negotiation with a customerâ€™s buyer; it wasnâ€™t much of a negotiation and more like a decree. He knew what heâ€™d buy, he knew our margins, and he more or less stated what our prices and terms would be for that year. A bad deal for us? Not at all since the open book accounting that we both used meant that he understood our costs, overheads to absorb and returns that we needed to survive. He was a customer that valued our partnership and wanted it to be ongoing and prosperous for us both. We made money, and he had a supplier that would â€œjump through hoopsâ€ when required. It allowed him to more easily satisfy his customers.
The lesson that I learned from that business experience was that I should strive to be valuable to my suppliers and to be the best possible customer. I should help them to be efficient, avoid causing them unnecessary expense or aggravation and put as much into the relationship as I possibly could. In other words, treat them as well as my best customer.
Fine in theory but what practical actions could I take? This is my list of policies I employ and actions that I take to ensure that I am the best customer that my suppliers could possibly have:
1 Meet with them and explain to them what you need, the past problems with them and other suppliers, things that have caused inefficiencies and waste.
2 Explain to them your organisational philosophies, your corporate objectives, general business strategies and find out theirs. Seek ways in which you might be able to develop business togetherâ€“ them as the supplier and you as the seller in either new markets or new products.
3 Set up a strong communication base between you. Who speaks with who, when and about what?
4 Agree your partnership review dates and content, have it set out right
from the start.
Tactical/day to day
1 Get your people to communicate with theirs. Encourage a close liaison on a working level.
2Â Â Stick to your agreement. Pay on time, donâ€™t unnecessarily query items. Be prompt with queries and direct them at the appropriate people.
3Â Order efficiently. Use economic order quantities and give as much advance warning as possible when demand is likely to change. Avoid sporadic last-minute ordering where possible.
4 Make best use of imprest stock, buy back and stock cleanse. Have a system of regular review so unwanted items do not build up but are dealt with routinely.
5 Use their marketing materials to add strength and value to yours. As a manufacturer/distributor they will have product specifications, handling data, health and safety information all of which you can use.
Of course in the real world things do go wrong, there are emergencies, and there are mistakes. However if your relationship with a supplier is good, then they will work with you to get around these problems. If it is bad, the converse will apply.
One more vital thing I havenâ€™t yet mentioned prices. Of course as a starting point the supplier wants the most, and you want to pay the least, but again I would recommend a degree of open book accounting. Generally people are not fools, and your suppliers know the market and the margins you need to make a profit. If you are struggling to agree prices or discounts, you can discuss openly how waste can be reduced, how buying quantities might be increased and how you can even work together to attack the market and increase sales.
Logic suggests that any supplier desperately wants their customers to be successful and so will invest their effort in them if they believe them to be competent. There is no happier business than the one who sees all his customers doing really well. After all, it guarantees his ongoing prosperity.
So, if you both work together to agree a deal that is win-win to you both, then you will all work towards making the association a success.