Creating Value for Suppliers is Good for Business

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As Customer advocates we tend to see the Customers viewpoint. We want the supplier to understand and pander to the Customer, and provide Customer delight!

But do we ever consider how Customers treat suppliers? Suppliers (whether they have B or C type consumers), may have been mistreated, or their people mistreated. An example is a service person visits a customer at an appointed time and the customer is not there. Or a customer gives a cheque that bounces. Or he returns an item, after using some of it to get a refund. Some of these are repeat offenders.

In my book, Customer Value Investment: Formula for Sustained Business Success I quote Carlos Cordon of IMD who says that the crude reality is that he knows of no company that measures whether it is an attractive Customer to its suppliers, although most companies measure and re-measure every single action of suppliers. Chief purchasing officers can tell you about the ‘on-time delivery’ or ‘quality track record’ of, and other information on a supplier. Chief purchasing officers if asked about how attractive they are to their suppliers as a Customer, will probably answer, “Yeah, that’s important, but we do not measure it.” Companies talk about ‘relationship’ and sometimes that meant ‘relation-shit’, or about ‘win-win’ and that meant the same guy (the Customer) winning twice. No wonder that some suppliers are now calling for revenge.

Thus it is important to treat a supplier like a Customer and understand his needs, if you want to get the best out of him. We want to control our Customers and our suppliers. Really, we should remember to understand their needs and treat them right.

Cordon gives the example of a steel outage at Nissan causing them to shut down for 5 days. He wonders if this happened because Nissan were too tough with suppliers.

I spent time on a Customer Value course for the Indian Army on creating value for suppliers, so that the suppliers would work hard to ensure the Army was never shorted of supplies.

Thus business is all about getting to know the needs of Customers, employees and suppliers, and adding value to and consequently getting them to do their best for you.

I have many other B2B examples. For example Dow caused a resin outage at Continental Can years ago.

I had a reverse example. I made a deal with a resin supplier at 34.5 cents a pound for an annual supply, when the going rate was 33 to 33.5 cents a pound. 3 months later due to oil prices and shortages the spot price went up to 60 cents a pound. The supplier honoured our price for the longest time possible because we had been lenient and understanding when negotiating. They increased prices fast for our competition.

I had a boss, who taught me the art of reverse negotiation. He said always be nice to suppliers and they will work their b….s off for you. And so we were not the toughest negotiators but in return we got their loyalty, and the best service and support.

Do we want the supplier loyalty? To do so create value for the supplier.

Is this important for Customers to understand? And that a relationship is a two way one?

Gautam Mahajan
Gautam Mahajan, President of Customer Value Foundation is the leading global leader in Customer Value Management. Mr Mahajan worked for a Fortune 50 company in the USA for 17 years and had hand-on experience in consulting, training of leaders, professionals, managers and CEOs from numerous MNCs and local conglomerates like Tata, Birla and Godrej groups. He is also the author of widely acclaimed books "Customer Value Investment: Formula for Sustained Business Success" and "Total Customer Value Management: Transforming Business Thinking." He is Founder Editor of the Journal of Creating Value (jcv.sagepub.com) and runs the global conference on Creating Value (https://goo.gl/4f56PX).

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