There is a restaurant where I often go for lunch, which is owner/chef operated, and there is a sign at the window where the food comes out from the kitchen that says: “Annoying the Chef Leads to Smaller Portions.”
Too often in business, people think that just because they hired a vendor, they get to dictate and control and be aggressive in telling that vendor what to do. Sometimes clients believe that by being tough and very demanding, it will lead to better results – but most of the time, the exact opposite is true. Vendors and suppliers don’t like to be bossed around and treated harshly. If a client is a jerk, that client’s suppliers are less likely to go above and beyond for them.
Especially in the current economic moment, when the job market is booming and lots of companies are struggling to find good help, it’s important for business owners and B2B buyers to keep in mind that suppliers and vendors really do have lots of options. They’re not all desperate to win your business, or keep your account – don’t assume that your company has all the leverage in the business relationship or that “the customer is always right.” Because if you push your suppliers too far, they will walk – or more likely, they will deliver the goods or services as promised, but without the extra value and insights and effort that you could have gotten if you had treated them better.
Anyone who’s ever been a supplier or vendor or selling to B2B companies can probably relate to this feeling, right?
Best practices for managing supplier relationships in a more productive way
Be Collaborative, Not Adversarial
Your suppliers are not your enemies. Too often, business owners and procurement managers tend to act like supplier relationships are adversarial – like the suppliers are trying to trick them into getting a better deal. This is a false choice. Supplier relationships should not be an “us versus them” mentality. Working with suppliers should be collaborative and mutually beneficial – you should all have the same goals, of making your organization more successful. Because if things get better for your organization, things should get better for the supplier, too.
Don’t Just Cut Costs; Look to Add Value
The classic concept of supplier relationship management tends to be focused on squeezing suppliers for cost cuts or demanding higher efficiencies and shorter delivery turnarounds. It’s true that sometimes cost is a factor and you need to ask for a break. But more often than not, unless you are in a commodity business where cost is the only competitive advantage, you need your suppliers to do more for you than just cut costs. You need your suppliers to care, to innovate, to bring their best thinking to your business challenges, to cooperate with you in creating solutions. All of that goes well beyond “which price quote is the cheapest.” Some of the higher-priced suppliers are higher-priced for a reason – because they have options for who to work for, they’re in demand, and they charge a premium price to reflect this.
You should want your suppliers to be happy and profitable in working with you, not harried and stressed and always under the gun – because if working with you is a good deal for them, they’re going to want to add more value for your organization in ways that are worth more than they cost.
Or you can constantly cut costs and be a difficult client and keep your vendors/suppliers scrambling at the last minute, but you’re going to lose good people that way – and your business will suffer. It’s worth it to you to be a great client and even to pay more for excellent suppliers, because they add much more value to your business than the cut-rate low-budget competition. You can’t afford NOT to treat your suppliers well. This is a different philosophy than the cut-rate commodity approach – it’s true, sometimes cost is the most important factor and you need to save money. But most of the time? Your suppliers are worth paying for.
Work Together for the Long Term
Just like every customer relationship has a “customer lifetime value” of all the repeat business that you get from that customer over many years, every supplier relationship has a “supplier lifetime value” as well. Ideally, you should want to build and maintain relationships with suppliers over the long haul. It saves you time and money by not having to put projects out to bid all the time. It saves you time and money by having a reliable team of suppliers that you can keep working with. It adds value to your organization in lots of ways when your suppliers get to know your company better over time when they know your industry when they know your culture when they know how to go deeper into your business problems and bring their expertise to bear in helping develop solutions. Think of your suppliers as being part of your organization’s “institutional memory.” There is value in having suppliers who have been working with you for a long time; they can often help you save time and money compared to cheaper upstart competitors.
Restaurateurs and chefs are some of the most generous and hospitable people on Earth, but they can also be prickly if annoyed or offended – many restaurants have a sign on the door that says “We Have the Right to Refuse Service to Anyone,” and it’s there for a reason. If you treat a chef with disrespect, if you nitpick and unfairly complain about the prices or unjustly demand a refund or make a scene, that chef is unlikely to give you a generous experience – and they might just kick you out of their restaurant forever. It’s the same with suppliers. Especially if you’re working with suppliers who are independent contractors or small business owners, these tend to be people who are passionate about what they do, they cherish their independence, and they’ve learned over time not to put up with abuse from anybody. So instead of acting like you’re the big boss who always knows best, look for ways to tap into your suppliers’ collective brainpower. Be generous and transparent with your suppliers. Instead of treating your suppliers like they’re your enemy, treat them as part of your team.