How to create supplier loyalty
give feedback and expect suppliers to stick to original deadlines and costs even when they have caused delays or changed specifications. Yet nowadays, it may not be the supplier that is competing for work, but the customer who is competing for access to key materials and services. A vital factor in winning that access comes down to the supplier’s experience of doing business with you. What suppliers want While brand association is valuable at first, its attractiveness diminishes over time. Revenue and profit share arrangements are also appealing (and demotivating if they are inadequate), but once these reach a desired level, they are no longer as important as a third factor: customer attributes. Suppliers want transparency and communication. Ease of doing business, collaboration, trust and partnership, all drive sustained advantages. Essentially, behaving in such a way that signals to them that they are a true partner is what suppliers want most, and which will consistently drive customer of choice benefits over time. Behaviour breeds behaviour, as they say, so customers who demonstrate good behaviour are more likely to get the very best from their supply partners. The easiest way to look at it is to treat your strategic partners as you yourself would wish to be treated. This doesn’t mean you can’t have respectful and robust conversations – in fact it facilitates them. And it doesn’t mean cronyism. It’s understanding that how you behave both on an individual basis and how your two companies interact plays a big part in why a supplier would
value your organisation above others. So return calls, reply to emails, give feedback when it’s requested, keep promises and be consistent. Listen to what the supplier has to say and treat them well. Action improvements To be a customer of choice you need to see things from their perspective and focus on supplier experience. For this, change is typically required in three areas: 1. Within procurement and supply chain – address processes and make changes to address concerns. Good SRM technology is a means to give a consistent supplier experience. 2. Outside of procurement – suppliers rely on finance systems, reliable payment performance, the speedy resolution of IT issues, planning and forecasting data and so forth that are outside of procurement’s purview. These too, will need to be tackled. 3. Behaviour and culture – this is likely to be the toughest challenge because it involves people and needs to be consistent and sustained. Both parties need to feel they have a vested interest in a relationship that is based on mutual respect. Try conducting these three activities to help build trust: 1. Measure and monitor both parties’ perceptions of the relationship using a 360-degree assessment. Carrying out ‘Voice of the Supplier’ research gives you the chance to find out what they really think about you and your competitors and will help you to understand
your strengths and weaknesses. If you do try to find out what your suppliers think, be sure you pay heed to the results and action appropriate change. State of Flux has helped numerous organisations carry out and analyse the results of such studies. The vast majority of Leaders and Fast Followers (90%) have gathered structured feedback from their suppliers in the past 12 months. And 7/10 Leaders use a 360-degree approach to gather supplier and business feedback. Over half of Leaders (56%) have conducted 360-degree relationship health checks with more than 50% of their critical and strategic suppliers. 2. Ensure both parties agree what types of behaviour are acceptable and how you would like to work together. Our research this year shows more than half of companies are now defining the behaviours that should apply to both parties as an element of their treatment strategies. 3. Conduct joint account planning annually. This should cover key focus areas for collaboration; the business profile of that relationship; a summary of its governance model; performance history and key risks; an assessment of the strategic value to both parties; key actions to develop the account/ relationships; and key actions to develop joint value. Once you have these in place use training and communication to ensure consistency across your organisation. A lot of companies put a large amount of effort into ensuring their customers get the best possible experiences because they want to build loyalty. It’s the same with suppliers, and in this age of interdependence, it’s wise to remember you may need them more than they need you. To find out more about how to conduct a Voice of the Supplier study and develop the right behaviour to become a customer of choice, email enquiries@stateofflux.co.uk
Being a ‘customer of choice’ brings numerous benefits – added resilience among them. To gain that status, consider the supplier’s experience
Everyone always wants the best from their suppliers. Some expect more favourable prices and top-level service purely on the back of their famous name or financial clout. Businesses, however, all too often forget just how much they too depend upon their providers, and that they may not be as important to them as they think. “Procurement doesn’t spend enough time considering if it is a customer of choice,” says Karen Sutton, a former CPO and is a State of Flux non-executive director (page 74). A customer of choice is a company that, as a result of its supplier management practices and behaviours, consistently secures preferential treatment from suppliers, that often extend beyond contractual obligations. It might give you first refusal on innovations; access to and retention of the best people; greater market intelligence; and prioritised supply during periods of shortages. All of which,
can have a great impact on an end service delivery, and translate to financial benefits. Certainly, it’s something many relied upon to get them through the worst of the pandemic. It was how they got to the front of the queue for scarce resources and preferential pricing. Having critical and strategic suppliers that are “willing to go the extra mile” is vital and is being widely reported by Leaders (66%). Our research found 84% of Leaders believe they are achieving customer of choice status with strategic suppliers. And almost 90% are confident that their supplier management programmes are well placed to tackle future disruption. Across the board, 6 out of 10 highlight engagement and joint planning with suppliers as a key means to help to mitigate supply chain disruption. All too often, however, suppliers are still expected to be grateful for whatever business is thrown their way. Innovative ideas are ignored; KPIs are one-way; customers fail to
All too often suppliers are still expected to be grateful for whatever business is thrown their way.
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