Insights on Strategy
A Monthly Newsletter published by
Strategy Development Group, Inc. June,
2004
Recreating Your Key Vendor Relationships
Have you ever noticed how often your friends and family are great resources
for you in different areas of your life? It could be a recommendation for a
movie, restaurant or stock purchase or advice on a possible career move or home
renovation. The more we know about the people around us the more we use them as
resources in all areas of our lives. Most of us are accustomed to tapping into
our network of personal relationships for information and support; but in
business, we often overlook this available resource, especially with our key
vendor relationships.
We all know that vendors are important resources to our businesses, but we tend
to limit the extent of these relationships to the product or services
requirements that brought the vendor to us in the first place, whether it be raw
material or parts sourcing, operational performance issues, or new
product/market development. If the vendor performs well, we deepen these
relationships but along similar lines. For example, raw materials purchases may
grow, operational projects may be enlarged or accountabilities broadened in
product/market development. If the opportunity arises, a vendor may initiate
expanding the relationship into new areas. For example, a raw material supplier
might suggest being a resource for another raw material or a part higher up in
the supply chain. In both cases the vendor drives the relationship and ends up
deciding what benefits will accrue to each party.
Consider Your Vendors Beyond Their Product-Service Offerings
There is nothing wrong with having your key vendors take the lead in defining
and deepening your business relationships. It is clearly in their interest to do
so. However, if you were to share more equally in driving the relationship, you
may get to enjoy even greater benefits similar to those you enjoy from your
friends and family. In order words, you could develop your vendors as important
resources beyond their product/service offerings.
Consider that there are many things your vendors do well that made them your
supplier of choice. The capabilities or skills that enabled your vendor to make
their products or services so special could be in such areas as manufacturing,
technology, research, marketing and so on. You benefit directly from the product
or service but what other benefits could you gain from these capabilities? For
example, if you wanted to begin manufacturing overseas, how could your vendor
who currently operates plants overseas support you in that effort through
introductions, knowledge sharing, joint venturing, etc? Or if you wanted to
improve your internal processes, how could your “low cost” vendor assist you in
developing and implementing better systems or share with you some of the hard
lessons learned in effecting change in your organization? Manufacturing is not
the only area. It could be in areas of marketing, finance, corporate
restructuring, channel building, technology and many others - wherever they
excel.
How To Start Benefiting
Every trusted supplier can be a gold mine of resource opportunities. But how do
you start to benefit from that gold mine? The answer is simple. You start by
talking to your vendor about your business strategy and the areas you need to
develop. You must first share with your vendors the direction you want to take
your business and what competencies you will need to get there. With that
information, they can begin thinking about how they can use their business
expertise, knowledge base and relationships to help you achieve your vision.
This process should be reciprocal. Both parties must share visions and goals and
objectives so each can be a resource to the other. The more open and transparent
both organizations are to the other, the more opportunities for leveraging that
relationship will develop. Issues of confidentiality and future competition must
always be weighed against communication and transparency. In some cases you may
need to sign confidentiality agreements to open up that communication. But the
opportunities for resource sharing are endless.
For this process to work, however, both parties must clearly communicate their
business strategy, vision, goals and objectives so that resources can be
employed in the right areas. If you are unable to communicate your vision
clearly, you should spend some time developing a more clearly defined business
strategy. The Chart Your Own Course strategic decision-making methodology can
be very helpful in clarifying your business strategy and vision and identifying
the resources you will need to achieve that vision.
The conventional customer/vendor relationship is useful; but by recreating and
expanding that relationship, the greater resource leverage will provide more
opportunities to move your business to new levels of performance and success.
If you have questions on expanding your vendor relationships, call Paul Ratoff
at (714) 572-3131 or email
paul@strategydevelopmentgroup.com
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