In a previous article we highlighted the various ways in which sales and service functions can be broken. If you are on the receiving end, then you have a legitimate right to protest and demand that things be made better.
But some customers are troublesome for no good reason. They have been supplied with a good product or service at a good price, yet still they complain, demand more and even dish out abuse if they don’t get their own way.
How do those of us on the front line react to customers like this? We all try to be as professional as we can but it is human nature to be less inclined to help them. The more demanding they are and the more they behave as if your job and your business should revolve around them, the harder it is for them to get what they want.
Do not pass go
From a business perspective, such customers are often associated with disproportionately high servicing costs. Because they take up a lot more time and effort they are inherently of less value so, you guessed it, they are demoted down the priority list, whether officially or unofficially. Bad customers often get what they deserve.
So what has all this to do with supplier management? Well everything, because to a supplier you are the customer and the same principles apply. If you abuse your suppliers, the chances are that you will be getting less value from them than customers who treat them more fairly and professionally.
In some industries, such as retail, supplier abuse is institutional. The big guys at the top of the supply chain can get away with an exploitative approach, but you have to be extremely powerful to pull it off.
By contrast, most of those reading this probably work for organisations that are smaller and less powerful than many of their key suppliers or the same size. For them, institutional abuse is just plain bad business.
Supplier abuse can also stem from poor management of the basics. If you are disorganised in handling supplier quotes, orders, invoices and delivery notes, for example, you could end up chasing the supplier for goods you have already received, or being chased for late payment because you failed to match up documents correctly.
Not distinguishing between categories of supplier might result in pressing inappropriate terms on another party, causing conflict and delay. The problems are aggravated if you keep inadequate records and go on to repeat the same kinds of negotiation again and again, with pretty much the same outcomes.
But it is about recognising that the relationship part of the common term supplier relationship management (SRM) is extremely important. The point is that when you identify the good suppliers you want to work with, it is in your interests to be a good customer to them.
It also makes sense to identify suppliers that are particularly important to you and to be proactive in developing your relationship with them.
Some suppliers, for example, are important because you spend a lot of money with them, in which case you need to trade with each other in the best possible way – with the umbrella contracts, processes to deal with exceptions and escalations, and even systems integration so transactions and information can flow efficiently between the two organisations.
For strategic suppliers – those with which you have a collaborative relationship and possibly even look to for advice and guidance – it might even make sense to put a joint commercial plan in place.
Some of the most mature and successful relationships come about when customers think not only about their own interests, but ask themselves what they can do to help their suppliers meet their business objectives as well.
SRM is a huge and complex topic and we can only scratch the surface here. The primary message is that optimising the supplier-facing part of your business should not be purely about metrics.
Spreadsheets and fancy analytics have their place, but solid transactions and good old-fashioned relationship management are equally important.