What Our Customers Can Teach Us About Supplier Management

By: Don Lynch, Senior Project Manager, TDO

Are you struggling with increased component lead times, price increases, and quality issues? You’re not alone.  The COVID-19 pandemic has caused interruptions in staffing all over the world.  This has led to late supplier deliveries, increased commodity prices, and unpredictable transit times.  Some of these supply challenges are trending back toward pre-pandemic levels, but many challenges remain.
So, what can we do to improve the performance and predictability of our suppliers?  The answer will depend on each business’s unique needs; however, there may be a rich source of ideas within our midst. Please think for a moment about what makes a great customer.  Your list may be different than mine, but here are some of the things that have defined great customer relationships for me:
1. Clearly documented requirements.
2. Predictable demand.
3. Few expedite requests.
4. Collaborative approach to resolve delivery and quality issues.
5. On-time invoice payment.
6. Opportunities to win new business.
These attributes create and maintain relationships that are built on openness, collaboration, and trust.  Great customers not only allow our businesses to grow in revenue and profitability, but they also help us to improve our operations so that we can become even more competitive.  Keeping in mind that every buy-sell relationship has a customer and a supplier, how do your suppliers perceive you as a customer?
• Do our purchase orders and specification documents clearly provide all the information that your supplier needs to meet your expectations?
• Is our component demand predictable?
• Do we often ask suppliers to deliver within their stated lead times?
• How do we engage with suppliers to resolve delivery and quality issues?
• Do we pay our invoices on time?
• Do we invite our best suppliers to help us develop new products and services?
If great customers can help our businesses grow in revenue and profitability, are there similar opportunities with our suppliers?  Can our suppliers’ expertise help us become a great customer?  Will becoming a great customer help improve our suppliers’ performance?
This all sounds nice, but what about getting the best (lowest) price?  My list defining a great customer doesn’t include paying more than other customers.  Great customers want best-in-market value from their suppliers.  This helps them earn acceptable margins so that they can continue to make investments to innovate, improve, and grow.  We want the same thing for our businesses, and so do our suppliers.
Being a great customer doesn’t mean that you pay more than best-in-market value for products and services.  Instead, investing in supplier relationships can lead to maintaining best-in-market value while fully leveraging our suppliers’ capabilities to help us improve. Are you less than satisfied with your suppliers?  Consider asking yourself how becoming a great customer may improve their performance.
If you are a small or mid-size manufacturer and would like to further the discussion, TDO’s team is fully certified to help. Reach out today to learn more and schedule a free consultation!