In these times of uncertainty and economic ups and downs, should companies establish long-term relationships with suppliers or adopt a flexible approach to customer-supplier collaboration?
Staying the course and not missing out on business opportunities while navigating turbulent waters is a stressful responsibility for executives, who are forced to stick strictly to their goals and delegate to other crew members to help with the more mundane tasks.
These “crew members” include not only the company’s own employees but also external partners, and there are many benefits to be gained from a solid and transparent relationship with customers, which provides a sustainable and secure advantage.
How to Choose the Right Supplier
In friendship, just as in business, relationships must benefit both parties and, as with any close bond, involve respect, trust, and mutual dependence.
A company may have a long-term friendly and informal relationship with a supplier; however, if both parties wish to strengthen the existing bond, they have no choice but to sit down and discuss all aspects of the relationship. For example, a company may have been placing orders “as is” with the same supplier for years without even attempting to secure the best terms. Such a situation does not exactly constitute a long-term supplier-customer relationship. If both parties take the time to meet and discuss and plan the expected volume of business—both in quantitative terms (order volume/value) and qualitative terms (expectations, ethics)—for the coming years, they can make highly rational decisions that benefit both partners.
For example, the supplier can currently count on a certain volume of business throughout the year and plan its production accordingly, thereby benefiting from better prices when purchasing raw materials and the ability to pass those lower prices on to the customer.
Knowing that raw materials have been purchased in bulk and are available to the supplier is reassuring for the customer, as this means the supplier can respond more quickly if necessary.
There are other issues that need to be addressed in detail to build a collaboration on solid ground. These include invoicing, payment terms, delivery schedules, etc., as well as a better understanding of the other party’s environment to jointly seek the optimal solution. Transparency on both sides is essential for establishing a relationship of trust, while understanding the other party’s market and its limitations can prevent future disagreements.
Growing Together
As business partners get to know each other and their respective markets, they can share resources that enhance products or services, improve industrial processes, and jointly invest in technology that will help develop and maintain competitive and strategic advantages. All of this can begin, quite simply, by ensuring compatibility between technological and IT systems to facilitate invoicing, print proofs, or logistics.
This special relationship between supplier and client must be nurtured so that it grows over the years, through the sharing of information, strategic guidance, and values.
Working with a small number of trusted suppliers is a common strategy that saves significant time and money compared to the process of issuing calls for bids and selecting and testing new suppliers. However, for some, the fact that a manufacturer relies on one or more suppliers may force them to specialize in a niche market and prevent them from taking advantage of new growth opportunities. These same people would argue that suppliers may tend to become complacent if they know they have a long-term relationship with a client, and that not entering into a long-term agreement forces external partners to remain vigilant.
This very real risk can be easily avoided through constant monitoring of the services and interactions between both parties, making changes or resolving issues as they arise, if necessary, in a way that strengthens the relationship of collaboration, loyalty, and respect, in addition to the financial rewards.
