Journal of Trading Partner Practices: Building the Perfect Supplier
Through a special arrangement, presented here for discussion is an excerpt of a current article from The Journal of Trading Partner Practices, the official online publication of the Vendor Compliance Federation (VCF), the Trade Promotion Management Associates (TPMA), and the Federation of Credit and Financial Professionals (FCFP).
It is often forgotten, particularly in difficult economic cycles, that suppliers choose their retail customers by targeting specific, prospective customers - and not vice versa. Given this market reality, perfect retail trade customer relationships require a significant degree of thought, process, and measures, beginning with the process of targeting the right prospects.
To truly improve margins and profits, retail customers do not just desire, but require strategic, and strategically aligned - suppliers. Understanding this can help to target your marketing and sales efforts. Such an analysis will extend beyond right product/right price. It requires the seller to understand and be prepared to execute on that particular retailer's long-term expectations.
Ask yourself the following questions when considering which retailers to target as your perfect customers:
- Do you have a plan for constant improvement in service, delivery, quality and value added services? If this is something the retailer requires, are you willing to invest in such a program with no guarantee of a price increase?
- Do you understand the retailer's strategic mission of, for example, "high velocity, error free supply chain," and do you have the distribution infrastructure to accept and support it? One must think through exactly what this will mean for one's business when delivering each purchase order. Business is not profitable if it is not aligned with your capabilities.
- On the other hand, one must also consider the investment necessary to achieve alignment as compared to the long-term value of such a relationship. Is it worth it to make the investment? Only you can decide, based on your own strategic goals.
- Does the retailer have a reputation for making changes to existing policies, requiring additional discounts, or extended payment terms? Are you willing to make exceptions when the retailer faces unforeseen competitive situations? Or, would you be able to show the significant value you already provide, therefore mitigating the request?
- Do you have the necessary business processes in place and EDI capabilities to communicate and share data as the retailer requires?
- Are you prepared to secure additional raw material or do you have the ability to increase capacity when an unexpected increase in demand occurs? This is important for fast-growing retail chains and those focused on replenishment.
These are some of the questions that need to be considered beyond the questions of right product and right price to ensure you have even a shot at creating perfect customer relationships. Many suppliers have tried to maintain a relationship to "keep the revenue" without considering the deterioration of the customer relationship due to poor quality and service, and mounting costs incurred by forcing both sides to maintain a customer relationship. If the supplier does not have the capabilities at present to be able to answer or respond to these questions, or deliver on its own promises, this may not be a perfect customer.
Discussion Questions: Which part of the working relationship do vendors most need to consider in deciding whether to sell to a retailer or not? Which part of the process is most underestimated?