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Our thoughts on the latest developments impacting your business.

Get to know your suppliers well, very well!

As a marketing consultancy you would expect that we generally hear prospective clients and new clients (particularly those in the early stages of a relationship with us), asking us to help them with their plans for growth.  This of course is a fairly reasonable request. But it’s only when we explore with them, how they define ‘growth’ does this subject really gain momentum. Do they consider that growth is purely about an increase in customer acquisition, do they consider it to be purely turnover, or do they consider it to be profit driven. Because as we all know, increased turnover does not relate to increased profit.

Generally, when we ask them where this growth is going to come from, they initially only ever consider from the paying client. But particularly in the case of the sectors we work, this narrow view is usually held by many small to medium sized business owners.

However, as Dr Michael Porter showed with his theoretical model about market forces it is unwise to consider the only power in a relationship lies firmly between your customers and you. So for those of you who believe your suppliers are there to serve your every whim and demand you must remember that if this is the role your suppliers have with you they will not appreciate it in the long-term. You may believe (unwisely) that there is always another supplier, and of course you would be correct, but this kind of arrangement doesn’t come close to forming the essence of a truly supportive relationship.  Not only will you have consistency issues between the supply and quality of the goods, but the arrangement you have used will have taught the supplier many things. Often things that you may take for granted or at worst completely overlook until it’s too late to do anything about it. Changes in material supply will create increased workload for you and your staff. Delivered goods will require a level of checking, many manufacturers take as expected. The way they present invoices for payment will be different, their suppliers too (if used may be different) and so in each case you find yourself spending more time, particularly in those early stages of transition doing nothing more than verifying material inputs. Those phone calls to the supplier asking for that ‘little favour’ that helps you overcome a problem, may also become a factor you can no longer take for granted, at least in the short-term.

Alternatively you can adopt the same processes as the world’s major manufacturers. I can think of several examples of internationally acclaimed manufacturers in the automotive sector, who treat their suppliers as part of their extended family. The quality of the leather supplied for the seating, the engine components, drive train, brakes and numerous other items, all form essential elements in delivering an exemplary service that supports their growth. If contracts are necessary for these companies, you shouldn’t think your products are any less valuable. If that’s what helps you measure performance, setting standards and ultimately building relationships, then you should embrace that process.

Your supply chain is the embodiment of the service or product you supply to your customers and the stronger this relationship, the easier you can fulfil your obligations and thus support your growth.

Some companies believe it’s perfectly acceptable to harangue the suppliers into giving better deals on materials, sometimes these may be passed on entirely, sometimes proportionately, sometimes never.  Personally, as a quailed Chartered Marketer I don’t believe this is fair, appropriate or ethical. Buying items at a cheaper rate, only to withhold the margin is nothing short of unscrupulous, and puts short-term tentative profits before long-term sustainable gains.

Suppliers can be your biggest allies.

Furthermore there’s another benefit to working effectively with your suppliers that’s less obvious to see than those mentioned previously. Porters Five Forces shows the risk your business is at from various threats such as substitute products and new entrants who will challenge your future growth, potentially with the suppliers you need to embrace!

No business works in a vacuum, they are all impacted upon by Porters Five Forces and its more recently extended levels for , so if you are truly looking for growth, consider the relationships you have with your suppliers. They are there to help you just as much as your customers, and remember if you select the wrong ones, you may be up to 100% responsible for the decision to select them in the first place. So take time to get to know them extremely well, uncover what they do well now, and what they’ve done well before. Look at their track-record, exactly as you would if you were making financial investments. Build relationships with more than one person and help them with information that can serve them well, it will help you in the long run with that growth plan you were looking for.

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