…. Continued from last week
Prompt payment of suppliers. This is another major factor used to determine a customer of choice. Suppliers are encouraged when they receive payments of their invoices promptly and according to the terms of the contract once the contract has been executed. Nothing discourages a supplier more than delayed payments. This is because the supplier also has bills to pay from the execution of the contract. Some suppliers use bank credit facilities to execute their jobs and pay heavy interests. Therefore, any delay will attract new bank charges and increase the cost of executing the contract. Suppliers should also be able to work through a well-structured procure-to-pay process that avoids lengthy delays and delivers on-time payments. Many organizations have payment terms of 30 days, 45 days or more at the behest of their Finance teams, but this cycle can be unnecessarily extended by inefficient payment systems, further impacting on the timeliness of payments.
Ease of doing business. Business organizations consider the ease of doing business as a major factor for building and sustaining business relationships. To emphasize this point, the World Bank publishes an annual report on the Ease of Doing business in various countries of the world. According to its 2018 report, of the 190 countries ranked, Nigeria emerged 146th, dropping by a spot from its 145th position in 2017. This is a bad return which will discourage genuine businesses from coming into Nigeria.
Similarly, suppliers use the ease of doing business with their customers to rank them in order of priority of customer of choice. They consider their processes for registration, pre-qualification, procurement to pay, conflict resolution and so on. Suppliers appreciate customers whose processes are clear, simple and consistent. They also are happy with customers who dispatch their work with a sense of urgency and understanding of the pressures under which the suppliers operate.
Good Customer – Supplier Communication. Good communication is an invaluable factor in determining a customer of choice. Organizations should have an established working communication chain with their suppliers. The supplier must never be stifled of valuable information. Invitation to tender must be clearly communicated to the prospective suppliers, the quality standard of the organization as well as the terms and conditions of contracts must be clear to the suppliers. Suppliers are frustrated when they are not hearing from the customer as at when due. They cherish prompt feedback on tender outcomes. The successful bidder should be contacted, and the unsuccessful bidders should also be informed promptly. When you do this, the supplier can plan better and know when to focus attention on other prospects. The practice in many organizations of keeping the suppliers in the dark about their tender outcomes for months is a clear sign of lack of empathy and this does not strengthen the relationship. Customers of choice will never leave the supplier in the dark of valuable information. They listen, communicate, and resolve issues promptly with the supplier. They provide performance feedback to their suppliers, jointly review their performances and request that their suppliers in turn appraise their own performances too.
Attitude. The attitude of the customer to the suppliers is also an important factor. Staff of the customer should endeavor to show respect for the supplier. They are expected to adopt sound customer service skills to delight the supplier. They should be courteous and attend to the supplier and their needs with dispatch. Also, staff of customers should demonstrate high sense of integrity for their company to be regarded as customer of choice. They should not engage in arm-twisting of the suppliers for personal gains. The philosophy of win – win should be the bedrock of the relationship. When the supplier sees the customer as genuinely interested in the growth of his business, the tendency is for the former to raise his premium of value of the customer. In short, the general attitude exhibited by staff of the customer towards their suppliers is a defining factor for a customer of choice rating.
Long-Term Relationship. A business organization which has the tradition of retaining its performing suppliers in a long-term relationship is a candidate for the customer of choice. The relationship therefore, is beneficial to both parties. This kind of relationship is transparent, collaborative and the parties consider themselves as partners. The importance of enduring relationships in business cannot be over emphasized. It has memories which help to keep them going. It is symbiotic in which the customer gains value and the supplier also gains value.
A customer that treats his suppliers in the above stated ways is most desirable for the supplier and consequently will command the suppliers’ loyalty. The question therefore is ‘Are there benefits of becoming a customer of choice?’ Of course, there are. Marco Nink, senior consultant at Gallup Management Consulting, points out that there are five main benefits that accrue to an organization regarded as Customer of choice by the suppliers. These include: Higher quality, as the supply chain contains less waste of resources from rework; Improved planning which results from greater access to more accurate forecasts, or more on-time delivery from the supplier; Improved product development as the suppliers will give you access to the latest innovations; Greater support and value by which Suppliers provide you with greater resources and provide beyond-contractual support; Lower costs in the form of lower transaction costs, reduced unit price and generally lower cost of doing business. These benefits could be crucial to the overall success of a business.
In conclusion, any business organization that craves to be a customer of choice or a key account to its suppliers should have a paradigm shift. The traditional belief that buyer-supplier relationships are purely dictated by spend; that is, the more a company spent, the better it is valued and treated by its suppliers, has changed in today’s business world. Business leaders are beginning to recognize that a focus solely on volume or spend is short-sighted and deters from overall value creation. Organizations should train and coach their Contract Management teams on behaviors that can improve supplier relationships and see how loyal their suppliers can be. That loyalty pays off greatly when the suppliers have value creation choice to make between customers. My humble submission therefore, is that suppliers are more likely to prioritize a company whose views on overall value are aligned with theirs and such companies will always command the suppliers’ loyalty.
Gob – Agundu Uche FCIPS, Chartered
Gob – Agundu Uche is a Fellow and Chartered Member of the prestigious Chartered Institute of Procurement and Supply, CIPS (UK). She is also a member of the Chartered Institute of Logistics and Transport, CILT (UK).
