3.2.4 Measuring Customer / Supplier Relationships
I remember sitting at my desk, quite stunned by what I had heard. “For God’s sake, Alan - you’re running a factory, not a milk bar”. Alan was the Purchasing Manager of an international tyre company and the speaker was my work colleague whose patience had finally snapped as Alan once again asked for an urgent delivery of tyre cord yarn in the middle of a Friday afternoon.
“There are going to be some serious repercussions from that remark”, I said to myself. ”I wonder how Denis is going to extricate himself from this little episode”.
But there were no repercussions except of a positive kind. Alan stopped ordering yarn on a Friday afternoon and Denis agreed to ring him every Wednesday morning to remind him to place his orders. As Denis put it to me one day - I see my role as rather like a doctor looking after the health of a few key patients. If they are healthy, then I have nothing to do.
I have known three sales people in my working life who were universally liked and respected by all their customers. All had that wonderful gift of being able to say anything to anyone without giving offence. We would call it “frank and open communication” these days.
When criticism was warranted, they gave it and their customers accepted it – for two reasons. Firstly, they trusted the critic and secondly, the criticism was always followed up by how both customer and supplier could work together to resolve the issue.
However, let’s not kid ourselves - things have changed a lot since the mid-seventies when the above exchange took place.
- The time required and the time available to build personal relationships with customers and suppliers is more limited
- Job mobility has increased dramatically so one is constantly re-establishing new relationships
- The face-to-face meeting has given way to e-mails and video conferencing.
Competition, both at a personal and organisational level, has intensified
- Long-term job security is a thing of the past
- Supply exceeds demand
As a consequence of all these factors, customers generally call the tune with their suppliers. They establish Key Performance Indicators based on things that can be objectively measured like Time, Quality and Cost. Of course, these factors are critical but they are the outcomes of - and dependent on - the strength or otherwise of the underlying business relationship.
Relationships are much harder to measure as they are made up of such subjective values as communication, trust and commitment. Furthermore, the objective measures focus on only one party to the relationship - the supplier - and we all know that it takes two to tango.
In fact, I am sure that many well intentioned and very capable suppliers are only as good as their customers allow them to be.
Of course, the nature of the relationship between suppliers and customers varies enormously. At one end of the spectrum you have “just another supplier or customer”; at the other you have an “invaluable business partner.” In just about every business, there will be a small percentage of the latter.
Checklist of factors that underscore the definition of an invaluable business partnership
- The relationship is an on-going one
- It is crucial to the success/performance of BOTH parties - eg both parties need the other to roughly the same degree
- What is being supplied is a highly differentiated product or service – alternatives are not readily available in the short-term
- There are few rather than many suppliers
- There are few rather than many customers
- Both parties want the relationship to continue
Customer/supplier partnerships that meet all or most of the above criteria are on the increase.
Sub-contracting and out-sourcing of services that were formally done in-house continues to grow.
Manufacturers are constantly seeking to reduce the number of suppliers that they deal with in the search for greater efficiencies and productivity.
Suppliers are much more prepared to customise their products and services to the requirements of a key customer and to add value to the basic offering through just-in-time, training, technical service etc.
If it is the intention of the parties that the relationship should develop into an invaluable business partnership, then it is not sufficient for the customer to rely on a set of objective measurements relating to Time, Quality and Cost performance of the supplier. For one thing the customer’s impact on these performance measures is ignored, as is the underlying business relationship.
Now bpi consultants, through their association with SCCI Ltd, have an instrument that can measure the intangible and subjective aspects of business relationships - Partner Link
The assessment does two things. It measures how each party to the relationship views the other and it identifies the specific issues on both sides that are inhibiting the relationship’s development.
It’s a world first; it works - and it’s in Australia.