Suppliers play a very important role in the production of your products with materials and components that you need to build complete offerings. Suppliers may also have services and operations that can enhance your own operational efficiency or expose you to new channel opportunities. Wise entrepreneurs learn to look past the simple supply of components when developing supplier relationships. Instead, they establish a collaborative relationship whereby the supplier’s business interests align to support the purpose and mission of your business with your customers.
W. Edwards Deming said, “Let us ask our suppliers to come and help us to solve our problems”. This implies establishing two-way relationships such that your suppliers develop a comprehensive view of your customer facing systems. This includes the factors influencing demand for your product, and the processes for delivering products to increase efficiency, reduce cost and reduce the risk of a failure. Clearly, this goes way beyond simply supplying products or component parts. This approach connects the supplier with your business objectives and assures their actions and support systems will be oriented in that direction.
This also means that the relationship contemplates the long-term strategies, plans and trends for your business so that systems adjust to achieve your objectives. The joint relationship can then better address the broader go-to-market issues for the complete delivery value chain, changes in marketplace conditions, and competitor developments. You must ensure that the relationship with the supplier supports your business strategy directly and does not compromise your strategy to fit their existing business models. Doing so would hamper your ability to deliver the products and services that your customers expect. You will then incur great expense attempting to patch up the gaps or differences between the suppliers systems and your own strategy.
As you develop a collaborative relationship with any supplier, make sure you understand the cost and other financial implications of each proposed business model. There are many technology solutions available for managing relationships with suppliers. Treat them as you would any new supplier relationship. That is, make sure that the technology supports your business strategy first, and resist having some attractive package define your strategy for you.
Some useful questions to consider include:
How important is the supplier’s product to your product offering?
Do they have other products that can expand your product offering or open up new markets for you?
Do they have operational, delivery, support, or other systems that could support your business strategy directly?
What is the cost of each option for integrating their business with your strategy?
What is the specific benefit in terms of cost savings or increased sales or more efficient service from this relationship?
Is the supplier willing to enter a collaborative relationship whereby they align with your strategy?
What alternative suppliers exist for the same products and how do they measure up against these questions?