Research shows that it costs about five times more to attract new customers than to retain existing business, and that they leave a company between two and five times more often than they enter.
Most people would be better off sticking with their existing supplier. But the same cannot be said for your suppliers. If your supplier is behaving badly it is harder to resist that supplier than it is to stay loyal to a previous supplier.
As such, customers are at the heart of the relationship.
The best way to keep customers happy is to keep suppliers happy
You cannot control their behavior. But you can improve the working relationship and reduce costs by managing your suppliers. Remember, businesses need to start implementing strategies that will help them enter the fourth industrial revolution.
There are three basic methods you can use to manage suppliers. The first is to direct your supplier to behave in a way that is beneficial for you. The second is to monitor and respond to your suppliers behavior, whether good or bad. The third is to improve your supplier’s behavior, but this comes at the expense of your relationship with your supplier. It is difficult to get good behavior without getting both.
The two methods are quite different. Direct control The simplest and the most successful management technique is to have a single person responsible for controlling all the various components of the supply chain. This person is called the ‘director’. The principle of the direct approach is that you simply tell the people in the business the conditions that you want and if they don’t deliver, they are out.
Your directer is the man who will make the decisions for how things should be done, and the supplier will carry out those orders for you. The problem with this approach is that it leads to over-supply and over-production of various parts of the product. In the direct approach, the manager is in control but the responsibility to make decisions about how they are to be carried out lies with the supplier. The problem is that with the direct approach, the manager doesn’t have any say in how things should be done. The other problem with the direct approach is that it is quite inefficient. As an example, a factory can employ one person to make a particular set of parts. They can also employ a team of five people to make all the parts needed in that factory. If the factory can employ a worker for one shift and one person for five shifts, then it will take six people (5 + 1 + 1) to make all of the parts for one shift and all the parts for all five shifts. An indirect approach to management is to set up a division of labour with each worker being responsible for managing a particular task or task group. The tasks are different every day, and are either more specific, or more general. When a task is completed for the day, it is submitted to the manager of that task, and a list is submitted to the supervisors for the following day. The system allows each worker to focus on their own task. It’s fairly simple to implement, and it gives the worker a sense of ownership, while still maintaining accountability. An example from a manufacturing company is the process of removing the vacuum from a product. Every employee is given a vacuum for a job. They work for a few hours cleaning a specific portion of the product, and then return the vacuum to their appropriate station. There is no system at all involved in removing the vacuum from a package. Instead, the vacuum is cleaned at each station. Every task is managed by the workers, which allows the process to move as fast as possible, rather than allocating time to each worker to do a specific task.