Supplier M.D.-Where Does It Hurt Most?
Why do customers choose us as suppliers? Maybe they are close friends. Maybe another customer referred them to us. There are tons of possible reasons why. However, there are typically 4-5 main reasons why suppliers choose certain suppliers over others. We call these reasons customer pains, which refers to their need to get something fixed. We will take a deeper look into these key pains to understand better what they mean and why they are important to the customer.
Price. What is the easiest way to boost your bottom line? Reduce costs. Buyers are trained, and usually paid to find ways to cut costs in their supply chain, so you must provide a cost-effective product. Effective supply chain management, production operations, and economies of scale are just a few techniques that suppliers can deploy to reduce costs and hopefully meet the demands of a price aware customer. However, sometimes you get what you pay for, thus low prices carry with them risks on the quality and delivery of products and services.
Quality. Some companies must have the highest quality standards possible and are penalized immensely if products have defects. As a result, many companies choose a specific supplier based on their quality control abilities. By choosing a supplier with high quality standards and a reputation for providing quality products, companies can assure that costs associated with defective products will be minimized. For example, the Takata Recall , which was an airbag recall due to defective products, cost several automakers millions of dollars as they had to replace the defective products with new ones. Alternative reasons for picking a supplier based on quality may be based on a desire for improved safety, reduced liability, or even industry regulations that require certain quality standards. Although quality suppliers may sometimes cost more, we can look to the Takata Recall too see the financial ramifications of defective products.
Delivery. Getting burnt in the past on expected delivery dates motivates many companies to pick a specific supplier based on their ability to successfully meet due dates of products. One of the biggest headaches buyers have is late deliveries. This can cause backups in their own deliveries, missed deadlines, and ultimately loss of business. While your company may not face financial repercussions, the receiving company may not be able to meet the production schedule. These delivery issues can even cause some manufacturing plants to become idle until the materials needed are finally received. As a result, many companies have placed added emphasis on picking suppliers with superior delivery, as well as being accountable to the delivery requirements. Because of the costs associated with inaccurate deliveries, companies are increasingly picking suppliers based off their delivery effectiveness.
Service. Many buyers today examine a company’s ability to service the sale before they make their purchasing decision. In situations where buyers have complex parts and needs, it is vital to do business with a company that has a reputation for great service abilities. Purchasing professionals are increasingly awarding business to companies that not only fill the basic service requirements, such as on-time delivery, but also those whose efforts go above and beyond the standard by creating value in other areas via expert knowledge. According to Forbes, “Instead of operating service as a cost center or outsourcing it to third parties, firms are establishing on-going relationships with customers, improving the lifetime experience and engendering loyalty while simultaneously cultivating a healthy, recurring revenue stream.” By emphasizing quality service, suppliers can meet the needs of service buyers, creating a long-lasting relationship with high probability of repeat business.
Geography. Another driving factor that causes companies to choose certain suppliers can be seen in the geographical relationship between customer and supplier. Close proximities between the two can help reduce freight and transportation costs. Not only can costs be reduced, but so can lead times. Smaller distance needed to delivery product results in a reduction of lead times for products to be made and delivered.
When suppliers understand why their customers are searching for new suppliers, they can more effectively market their products to show how their offerings can ease the pain of the customer. The key though is the ability to identify the pain from the beginning. This is why great salespeople are basically like doctors; they diagnose which of these reasons is causing the most pain to the customer and provide a solution to ease that pain.