Sunday, February 24, 2013

How Do You Choose Your Suppliers?

Suppliers are a key input to the value chain of all organisations, whether it’s simply ensuring that you have an effective and efficient IT system for your needs; or to offer the quality and timely supply of key components and/or services that have an integrated impact on your organisational performance, profitability and customer service. But how do you choose the right supplier for your organisation? And what’s your approach to reviewing your supplier’s performance? 
Organisations that have been in operation for years have often developed special, collaborative relationships with their key suppliers where, although they are separate organisations, they work together as if they were one, since they benefit from each other’s success, or at least should do. The really smart organisations invite their key suppliers to be part of their strategic planning processes, so that the supplier can start identifying with the firms future vision and what they need to prepare/research to help make it happen (and ensure they are part of it). Also the supplier can often offer unique inputs and perspectives on their specific industry environment and what the future might look like, which by default will impact you and your products and/or services. 
Strong supplier relationships have such significant tangible and intangible value for both organisation and supplier that it’s vital the executive teams from both sides never allow complacency to creep into the relationship, as this can turn a solid relationship sour in a very short period of time and once the relationship is ‘lost’ or one party has concerns about the relationship, the strong collaborative partnership is unlikely ever to be the same again and real value will be lost to both sides. 
When starting out, or diversifying or opening a new operation in a new region, finding the right suppliers takes time and is something that an organisation should spend quality time researching, as finding the right ‘fit’ will have a real impact on pricing, quality, logistics, research, customer perceptions, profitability, sustainable growth and even your organisational culture, as having suppliers you can trust and who can ‘add’ to your strategic future are worth their weight in gold. 
So in today’s fast paced global environment suppliers should be an integral part of an organisations vision, strategy and day-to-day business. The fact that you don’t own them doesn’t mean that you should keep them at arm’s length, as they are a key extension of your business. 
So it’s strange that some organisations seem to treat their suppliers like second class citizens, people who should do as they are told, go the extra mile at their own cost and be happy to get paid ‘sometime’, whenever that may be. To be blunt, regardless of your size, this isn’t smart strategic thinking, as no one likes a bully and though the supplier may seem to be whistling your tune, they are only doing it as part of their own business strategy.  
That’s not to say all suppliers are smart either, where some are looking to make a fast buck or worse can’t be trusted with their customers proprietary information, using it to try and increase their sales with other competitors in the same industry.  
Unfortunately many, in fact way too many business leaders have become cynical of words like trust and collaboration, and prefer an arm’s length relationship with suppliers, where they feel that they have the power and it’s clear who’s in charge -  but by not developing collaborative relationships organisations and their suppliers are leaving opportunities off the table, as neither trust each other enough to look at ways of jointly adding real value to the current value chain and to look at new and improved ways to offer real competitive advantage in the future. 
If you don’t have collaborative relationships with your current supplier base, then it’s time to ask why not and spend the time doing a complete supplier review. This is where you spend time looking at identifying, researching and analysing local and international suppliers, finding out what they do, what their business philosophy is, and meeting them to assess how you ‘gel’ together and maybe giving two or three the opportunity to supply you for a period of time, while you assess if these are the people you can build a collaborative partnership with.  
The successful companies of the future will be those with strong collaborative supplier relationships – as it just makes good business sense for all involved.

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