CLEVELAND (June 30, 5:10 p.m. EDT) — When it comes to working with customers, suppliers have a lot of choices.
They can choose companies that foster relationship-based purchasing and work in alliance with their suppliers to get them involved in regular, two-way communications, said Hazel Beck, chief executive officer of consultant firm Value Innovations Ltd.
Or they can work with those customers that choose a transaction-based purchasing approach, said Beck, whose San Diego-based company specializes in supplier-management strategies. Most suppliers already know customers like that: They're the ones who would rather dictate terms themselves instead of listening to a supplier, Beck said.
“They're the customers with big sticks, and they don't mind using them on you,” said Beck, speaking June 23 at the Management Day conference during Plastics Encounter Midwest in Cleveland. “They don't believe in building relationships. They see relations as a battle, a power play, and there's no way [a supplier] will have any power.”
Beck moderated a conference panel on managing the dynamics of supplier relationships. One of her mantras was for customers to work with suppliers that listen to them. Some of the good ones use such creative approaches as supplier focus groups, aimed at understanding what a supplier is thinking, and executive supplier councils that pair top supplier executives with peers at end-user companies for informal discussions, Beck said.
Suppliers need to respond to the open-door policy tit-for-tat by buying into a customer's program, she said. Focus groups can be used to test a new idea or gain some insight from a supplier into a project's implementation, she said.
And some gold-star customers use what Beck called “road-map planning sessions” to lay out a company's plans over the next six to 12 months, she said. Those sessions explicitly detail a supplier's expectations over that time period and provide mechanisms to track and measure results, Beck said.
“They build trust and ensure that everyone is speaking with one voice,” she said. “In companies with changing culture, they are invaluable to align the cultures of companies.”
Sometimes, though, large customers have to make some difficult choices in deciding which suppliers to select, said Marcella Turk , global sourcing leader for plastics with Milwaukee-based GE Healthcare Technologies.
Currently, her medical-device company — a unit of Fairfield, Conn.-based General Electric Co. — has a major task: shrinking its global supply base of injection molders from more than 200 companies to a more-manageable number of 20 or so, Turk said. She called that “supply chain simplification.”
“We look for companies that offer some global advantages over competitors,” Turk said. “We have a number of programs that must be transferred from one region of the world to another. We want to work with suppliers capable of transferring what we want in our products to different regions.”
That work requires what Turk said are cultural and behavioral synergies, where the needs of both the customer and supplier are on the same page. That helps with both logistics and product launches.
Turk spoke of the need for suppliers that offer a well-rounded set of strengths. Besides having both global and regional capabilities, suppliers need to understand each internal customer, Turk said.
Many customers value suppliers that bring a strong engineering focus and technical capabilities, offering joint-development opportunities and help with new applications, Turk said. Supplier involvement at the design level forward helps with that, she said.
“Engineering skills translate into products,” she said.
But end users also are wary of suppliers in questionable financial health, she said. “We don't want to have to get our tool out of a [plant] because of problems,” Turk said. “That can be a challenge.”
Turk advocated that customers develop a balanced score card to measure the abilities of existing and potential suppliers. Such items as quality, delivery, responsiveness, cost, innovation and relationship management should be considered when scoring a supplier, she said.
Turk's strategy seems to fit with Beck's criteria for relation-based management between customer and supplier. The goal is improving the response of suppliers to customers, Turk said.