For most of my working life, I have dealt with customers of one shape or another. I have also had occasion to deal with suppliers. I have noticed a major difference in how organisations tend to treat both sides of their business. This became very evident to me when I moved from a CRM role to Purchasing with a major company. Immediately, the tone changed. When dealing with customers of the organisation, the focus was on diplomacy, care and attention. Customers were listened to and given the best of service at all times, which of course is correct practice. However, Suppliers were treated completely differently. The relationship tended to be more adversarial. There was an element of, ‘Customers do unto us, so we must do unto Suppliers’. This got me thinking; is it right to treat suppliers differently from customers? Which is more important to the company; the supplier or the customer?
I guess the customer/supplier importance situation is a bit of a ‘chicken and egg’ situation when trying to decide which is more important. However, let’s break it down and explore the matter.
The basic purpose of every company, its raison d’étre, is to make a profit. In order to achieve this, it requires two primary elements:
- A product or service that it can sell at a cost that is higher than the cost of production and,
- Customers willing to pay for it
This will meet the primary goal of the organisation. In order to be able to make the product from the sale of its product, a company must:
- Be able to efficiently produce the product and,
- Be able to source the materials required from suitable Suppliers
It’s a simple process really; we need to be able to source from suppliers and sell to customers. For many companies their sole focus is on the customer. In true Supply Chain parlance this is good practice as the focus of everyone in the supply chain should be on meeting the needs of the final consumer. However, if everyone is focussing on what’s happening downstream, we miss the opportunities that lie upstream behind us. Let’s face it, when you are driving your car, you concentrate on what’s in front of you (‘downstream’) but you must also, through the use of your rear-view mirror, be conscious of what’s going on behind you (‘upstream’)
Since setting up InnoChan Solutions, I have met numerous clients who have lost sight of their suppliers. As far as many are concerned, suppliers are a necessary evil and exist only to serve. When one of our important customers place harsh demands on us, we turn around and put even more pressure on our suppliers. This is a dangerous practice that can have serious consequences on our ability to meet our customer demands.
In order to usnderstand these dangers, we need to understand the structure of a Supply Chain. In essence, the further up the chain we travel, the less choice we have in suppliers.
Think of a Supply Chain as the ultimate champagne glass filling trick that you might see at a wedding. The glasses are stacked in a pyramid shape and as the top one overflows, it fills the glasses at the next level until the many glasses at the base are filled. In supply chain terms, the base layer of glasses are the end consumers. There are many of them and they can get their champagne from a number of the glasses (‘suppliers’) above them. As you progress up each layer of the supply chain, there are less ‘suppliers’ to draw from. So what does that mean in real life terms?
In most cases your business is one of many suppliers that your customers can choose from in order to satisfy their need for your (or your competitor’s) product. You give these customers your undivided attention in order to win their business and (hopefully) retain it. However, your business is also a customer to your suppliers. The only problem is that in real terms, you have less choice in the number of suppliers available to you to purchase from. This fact is ignored/not appreciated by many in business. I have come across several instances where a buyer placed undue pressure on a supplier, generally over price, quantity or lead times. This pressure lead the supplier to take the decision to stop trading with the buyer’s company.
So what, I hear you say. The buyer can source the materials they need from another supplier.
But that is not always the case. Remember that the further up the supply chain you go, the less choice you have. This means that a buyer may not have the availability of alternative sources of supply for their material. What happens then? How will the company meet its commitments to its customers?
If the buyer goes back to the supplier, the relationship will be dramatically changed and the cost of the materials will be much more expensive. This, in turn will place additional pressures on the company’s ability to supply its customers at the price they are willing to pay which could force customers to switch to competitor products.
Poor relationships with suppliers can affect your relationships with your customers. Think about that, the next time you want to put pressure on your supplier!
So what’s the answer?
Which is more important; Supplier Relationship or Customer Relationship?
In my opinion, they are equally important. As the song says “you can’t have one without the other”. Both suppliers and customers are two sides of the same coin. Companies today, must recognise the importance of Supplier Relationship Management (SRM) and give it as much attention and commitment as they currently do with their Customer Relationship Management (CRM). In fact many of the methods and philosophies used for CRM can be transferred to SRM procedures.
So what should you do?
Take time out to review your CRM and SRM procedures. In some cases, you might even need to develop SRM procedures. This is a worthwhile exercise because, without your suppliers, you will have nothing to produce that can be supplied to your customers.
The message is simple:
Without Suppliers there will be no customers and, Without Customers there will be no Suppliers. We all need to play in the game in order to win at this business thing….