Dean Kaplan suggests four ways to strengthen global manufacturer-supplier relationships
The alliance between manufacturers and suppliers is not always easy. Although the two sides are dependent on each other for success, the relationship can sometimes feel like a tug-ofwar for the upper hand. Whether you’re on the manufacturing side or the supply side, or even both sides, strengthening your relationships will make for a smoother, more profitable business, and frankly, a nicer day. Forming and improving these relationships can be difficult, especially when dealing with an international market where laws, norms and markets vary greatly; supplier resource management strategies are an important part of global trade. These four tips will help you strengthen your relationships and negotiate better deals.
There is a tendency among executives, especially entrepreneurs, to try and ‘wing it’ in meetings. But doing so can put both your relationship and business at risk. Before you go to a meeting, make sure you understand what the other side’s process is, what kinds of profit margins they expect, and what their pain points are. The more information you have, the more confident you’ll appear in negotiations, which will help you broker a better deal. Not knowing about your suppliers’ methods can wind up hurting you. Researching the individuals involved in the negotiation can also be helpful. Forming a personal connection to someone often eases a business situation – MarketWatch Centre for Negotiation found that negotiators can claim up to 42 per cent more value in a deal by abandoning zero-sum games and creating a relationship based on trust and collaboration. On the manufacturer’s side, reviewing available supplier directories will be helpful. For both sides, reaching out to your referral network for personal insights into how the other operates will help you far beyond what a simple Google search can do.
Strengths and weaknesses
Manufacturers often feel at a disadvantage with suppliers, especially if the supplier is the only one in the area. But, you may have strengths that you haven’t considered. For example, you might be able to offer a long-term contract, or you might be in a position to pre-pay. According to Nielsen, 55 per cent of consumers, in 60 countries, all say that they’re willing to pay more for products based on where the product’s components are created and sourced. All of these situations could garner you lower rates, discounts or quicker delivery. You might also be able to rearrange your production schedule so you can order during a suppliers’ slow period, thus becoming more valuable to them.
Look to collaborate
We tend to think of negotiations as situations where one person wins and the other loses. But it doesn’t always have to be that way. There may be ways that suppliers and manufacturers can work together that saves them both time and money. For example, you may be able to combine forces on ordering supplies you both need or utilize your networks to help each other find additional customers. You may be reluctant to provide a direct competitor with access to your supplier, but perhaps you know someone in a related field. Even if it does not save you money, creating more ties and better relationships between you and your supplier can yield benefits such as favorable treatment during crunch times.
A lot of damage in negotiations is done by emotional responses, which can lead to threats of legal, or even physical, action. This kind of reaction gets you nowhere. Nothing ends a discussion more quickly than anger, greed, ego, fear or other negative emotion. If you come to a meeting prepared with realistic expectations, you are less likely to react in a way you’ll regret later. It should go without saying that you should always be honest in negotiations and discussions. Don’t over-promise and don’t attempt to ‘nickel and dime’ someone with whom you are trying to build a relationship. Doing either can cause the other side to react negatively.
If things go wrong
Sometimes a relationship just can’t be fixed, or improved. If you find yourself in an unfortunate position with your supplier, and none of the above techniques work, it may be time to consider if there’s a way to eliminate your need for the supplier. For example, it may be worth investigating the idea of bringing the supply in-house. You could also consider providing financial or other support to a supplier of a similar, but related, product to see if they could begin to supply you with what you need, or even investing in a new company.
Just as in your personal life, business relationships can be hard work. Relationships don’t develop in one day. They need nurturing, care and consideration to be kept healthy. The good news is relationships rarely disintegrate in one day, so if you have relationships in need of strengthening, there’s still time.
Dean Kaplan is President of The Kaplan Group, a commercial collection agency specializing in large claims and international transactions. He has 35 years of manufacturing and international business leadership experience including a role as president/ owner of a custom fiberglass manufacturer. Today, he provides business planning and consultation to a variety of manufacturing companies.