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Three Strategic Dimensions to Effectively Assess Supplier Relationships
Customer relationships can range from painstakingly transactional to highly strategic and collaborative. In all industries suppliers know they need to treat customers differently, depending on the unique relationship they share. Based on our experiences working with business-to-business companies across a broad range of industries, we have identified three key dimensions that when used collectively can effectively assess suppliers’ relationships with their customers:
While these are not revolutionary concepts on their own, the application of all three concepts together can provide executable insights to choose where to focus valuable resources. Especially now, in an economy with lackluster growth, choosing winning relationships to invest in will set B2B companies up for sustainable, profitable growth.
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Let’s start with Trust.
In a supplier-customer relationship, this dimension assesses whether the relationship promotes mutual trust that both parties are pursuing complementary goals. It frequently relies on a history of a strong, meaningful relationships with key stakeholders from both companies. It involves trust in the supplier as a whole, the individuals that represent the supplier, and the product provided. A municipal procurement lead described this idea in an emergency situation he faced when a water main broke, “I called my supplier at 2:00am, and he sent the items I needed on a truck that went out right away. He knew that my word was good and I would pay, and I knew that I could trust him to get me what I needed.” Without trust as a strong foundation, the next two key dimensions have nothing to stand on.
Execution: The Next Building Block for a Strategic Relationship.
Does the supplier fully implement on its promises? Are the customer’s needs met in a timely fashion? Is there a cadence of interactions that supports implementation? By taking concrete actions to back up the established trust, a supplier will set up the relationship to become more strategic and collaborative. Often when talking about this dimension, the bad examples are more often talked about. An agricultural equipment dealer once shared with us, “I don’t order a lot of large equipment from this supplier, but when I do sometimes it takes a year. I’ve had an order take 18 months, and that makes it hard for me to grow my business.” While customers may trust the people they work with, and the product they receive, suppliers need to be careful to deliver on their promises if they want to bring the relationship to a more strategic, and productive level.
Collaboration–The Final Dimension
For collaboration to be checked off the relationship needs to promote collaborative problem solving and long term goal planning. A supplier needs to ask itself the following questions to determine if they have this dimension:
- Is the relationship treated as a team dynamic?
- Does each company view the other as an innovation partner?
- Are there processes in place to discuss mutual goals?
This dimension is where creativity and innovation can truly thrive, and the marketplace is full of interesting examples where this has happened. In the food and beverage world, we heard about suppliers and customers who work diligently towards this goal. “Our supplier knew we were working on a new product formulation, and their technical lead decided to tackle a prototype on his own. He was able to finish it and send the product back to Canada with our sales rep. When she got off the plane, she went straight to R&D and had him taste it. He was floored by the quality, moisture, taste and structure. Now we use that suppliers’ ingredient in five new products.” This proactive approach, resulting from strong communication between the two entities, can be repeatable with the right processes and goal planning in place.
For a supplier to truly develop a top-tier strategic relationship with a customer, they need to first thoughtfully assess where they currently stand by using the Trust, Execution, and Collaboration dimensions. Depending on the answer to that assessment, the supplier can start to answer questions regarding its potential for growing the relationship, such as:
- Can we create a relationship that promotes mutual trust?
- Are we able to execute fully on our promises?
- Would this customer be open to collaborating with us in the future and creating mutual goals?
If the answers to these three questions are yes, then the potential is there, and the road map to success is defined by conquering one building block at a time.