Tips on dealing with business storms before they hit
In today’s business environment, where every firm has to focus intensely on the ways in which they can achieve a cost structure that is acceptable to their own customers, tremendous strains can emerge between suppliers and customers, even ones that have had a long history of shared successes. It takes a significant effort on the part of both suppliers and customers to ensure that such strains are avoided and that there is a common focus on the contributions that in fact create value.
The message in the case study and comments to follow is an important one. If your firm is involved in a CoDestiny relationship, one that has yielded value through shared successes and one you want to have survive and thrive, you need to be proactive in planning for the possibility of storms in the future. Such storms can take on many shapes — new people, profitability problems placing pressures on key executives, a deliberate change in strategy, an acquisition, among many examples. It’s not enough to do “good works” and to deliver value. You must anticipate the inevitable storms that will someday appear, and prepare for them with frequent discussions, information exchanges, scenario plans, and occasionally, tough messages. When the storm hits, previously calm waters can quickly become troubled, and at that point, it will be too late to do anything other than be taken wherever those troubled waters take you. To avoid the adverse possibilities of a future storm, several specific recommendations are provided.
The case study that follows describes a strong supplier-customer relationship in which the waters unexpectedly became troubled. The ingredient supplier involved in this case study described the deterioration of a key customer relationship as follows.
“We have been a loyal supplier [to a certain customer] for years. We have innovated and allowed this customer to develop new products and grow to become the dominant player in their industry. Even though we have a great working relationship with all of the engineers and product development teams, a new purchasing executive arrived, introduced a totally new culture to his department, and began to run Internet auctions. These procurements gave no recognition to the value we create and there was only a 10 percent weighting in the formula for the quality of product and service that this firm gets from a supplier. This firm gave us their Supplier of the Year Award three years prior to this time, and we think our contributions have increased since then. In these Internet auctions, we are being compared side-by-side to suppliers who don’t belong in the same room.” [Ingredient Supplier Sales Executive]