Recently, on the internet, I discovered an interesting article published by an industry magazine, the Supply Chain Management Review.
The article talked about the relationship between buyer and supplier, but as soon as I started to read it, a song from several years ago came to mind.
It’s a song that has been very successful in Italy, but if you’re not Italian, I don’t think you know it.
The song is called “A woman for a friend”, by Lucio Battisti.
In particular, there is a verse that reads…” What a disaster…I curse myself…
I chose you, a woman, as a friend…”
Well, if you replace the word “woman” with “supplier” the lyrics to the song are a perfect synthesis of what happens when the relationship with a supplier becomes too confidential.
But let’s get to the point.
Close links between companies and their suppliers have always been viewed positively, and are considered as a corporate strategy to improve performance.
But, just as with personal relationships, the link can become unhealthy, for one or both parties.
You should know that there is a “dysfunctional dark side” to buyer/supplier relationships, where complacency, mental closure and shortcuts, obscure the good side of close interactions.
Before going any further, however, it should be noted that companies that invest in joint development programs, typically experience fewer conflicts and show more cooperative behavior. Apparently, therefore, everything is fine.
But, as the study conducted by the authors of the article shows, these relationships tend to degenerate.
It seems this “dark force” slowly but surely erodes the good functioning of the relationship, but not in a personal sense, but concerning the results and performance of companies.
In fact, trusting too much, you can fall into the trap of becoming too complacent towards the supplier and avoiding in practice to question the motivations, decisions and actions that are proposed to you, thus blocking solutions for improvement.
The main problem is that many companies ignore, or do not recognize in time, the risks of the potential negative consequences associated with this excessive proximity.
But what’s more, even among risk-conscious businesses, too many fail to assess the impact of this subtle drift in sufficient detail and are unable to react accordingly.
The point is that underestimating and ignoring these risks or acting too late can severely limit the gains and the performance of your business.
I confess that when I read this issue, I was a little surprised, as I never worried in this sense about the relationship with suppliers, or rather, I have always seen it from a very different angle, which I will tell you in a moment.
First, however, let’s see together how these dangers manifest themselves in everyday life. This will make it easier to identify them.
1 – The loss of objectivity.
If you place too much trust in a supplier in your organization, decisions about what is right and profitable to do, you can become less objective and end up neglecting what should be good business practices and product supply.
Surely, for example, you have happened to receive late raw materials or other materials necessary for the marketing of your products. In Italy, unfortunately, this is not a remote possibility.
At first, you thought that this delay would not have caused you significant problems.
Unfortunately, however, you soon realized that those days of delay, in the end, cost you a lot.
Whether because the competitors arrived at the point of sale with a new product before you, or just because you allowed them to take away some customers.
We live in an unscrupulous market, and losing a sale not only means losing an opportunity for profit but above all, having given it to the competition.
Such situations, if the company is not yours, can even make you lose your job or otherwise damage your career. You know it, today the working standards are extremely high, and …dura lex, sed lex.
This situation leads us straight to another consequence of a dysfunctional relationship between buyer and supplier, and the situation becomes even more complicated and depressing.
Paradoxically, the closer the relationship is, the higher the risk of opportunism be.
Here, by opportunism, I mean the situation where the supplier takes advantage – even if not entirely consciously – of the good relationship with the customer.
What happens is that, with the continuation of the relationship, the standards of supplies decrease more and more until they reach the minimum acceptable.
Maybe it was precisely those standards that, even if they were not written anywhere, made you accept the agreed price.
And if, while at the beginning those real pluses convinced you to buy from a particular supplier, now you find yourself paying the same amount, but receiving less.
It’s a bit like when you feel too confident about your partner, and you take for granted a whole series of attentions and actions, which are instead, just those that have built the initial basis of the relationship.
Unfortunately, in this case, you can’t do anything, even if I realize how much this makes you irritate.
We have reached the last of the three circumstances, and here the situation is really delicate.
3 – The “Redundancy of knowledge”.
This last case represents the worst situation, as the supplier has suggested wrong solutions or not congruent with your final objectives.
Redundancy also occurs because excessive interactions with the same supplier can limit the search for other, more capable, suppliers.
This is no joke because, in addition to them, the most dangerous situation is also the most difficult to identify.
The cases can be the most varied, but all are attributable to two basic assumptions: the terrible “we have always done like so”, and the pernicious “everyone does it “.
The result of these two statements is there for all to see: companies all equal, products all similar, fierce price battle.
I don’t think we need to add anything else…
Now, I don’t want you to get the wrong message: having strong, consolidated relationships with suppliers is really one of a company’s most valuable assets.
But equally, the situations we have just seen represent a hidden danger that could really ruin your life and career. The important thing is to be aware of this.
But what practices could mitigate these risks?
The solutions generally proposed, range from continuously stimulating suppliers to developing more performing supplies to drafting more specific and detailed contracts.
Other companies have adopted a system of rotation of purchasing managers, in order to avoid that there is enough time between manager and supplier to become too “friends”.
All these solutions, although acceptable, hide the downsides that make them concretely impractical for many companies.
On one side, I’m thinking of a classic small or medium company, which given its small size, does not have the possibility to rotate staff.
On the other, those who do not have the strength to impose their contractual conditions and product standards on their suppliers.
I believe that this way of dealing with the problem starts from the wrong assumption: to cure the symptoms without dealing with the real causes of the problem.
I want to ask you a question: why should you, as a buyer, limit the dysfunctional drift of a supplier?
Why should you have to sustain the costs and spend your time and resources on dysfunctions which you have no responsibility for?
There is another way to deal with the issue, and that is to take responsibility for your organization and to keep customers away from all possible inconveniences.
And you don’t do this with motivational meetings, master contracts or expensive turnover.
The solution that I decided to adopt in my small business is much more concrete and effective and is the one used by the Spanish Cortez in ‘500: burning the ships.
What do I mean by that? It means making sure that there can be no other solution than not to create problems for customers. A constraint that applies to my colleagues and me.
But most of all, it’s an advantage for those who work with us.
In fact, you should know that the More Sales with No Hassles system – the methodology that supports companies to increase sales and at the same time reduce costs in the distribution of their products – has among its fundamental elements a unique system of guarantees.
These guarantees not only protect 100% of my customers’ interests but they also continuously encourage us to be proactive.
In other words, we can’t afford to trick or take advantage of any circumstance – we’d be the only ones to lose.
As I always tell my guys, the only problem our customers have to have is to be totally satisfied, that is, to have obtained the desired result or to have solved a certain problem.
If you are also running these risks, I invite you to learn more about the More Sales with No Hassles system, and how it can help you increase sales in retail stores and reduce waste and hassles in the distribution of your products.