In his final monthly column, Michael Best considers the importance of the supplier to your business
Every small business will encounter a supplier. Some may have just one while others will have many. Some may interact with suppliers only occasionally, others several times a day. It all depends upon the nature of the small business. The supplier is the source of finished goods to be resold, raw materials to be processed into finished goods, or equipment with which the small business carries out its work. For most small businesses this makes the supplier a key character who has considerable influence over its well-being.
Stability and reliability
The daily challenges most small business-owners face are numerous and varied. One minute you’re resolving an irate customer’s problem and the next refereeing a difference of opinion between two employees. You’re the owner. You’re the go-to person when issues escalate and the last thing you need is for supply issues to escalate to the point where they need your attention — and disruption of supply might be imminent. What a small business needs from its suppliers is stability and reliability so that it may in turn offer stability and reliability to its customers.
But supply disruptions can happen for any number of reasons — manufacturing and delivery delays, inventory shortages, import paperwork errors, erroneous or incomplete deliveries, and defective products, to name just a few. Then there’s the age-old overdue payment reason. Suppliers like to be paid on time and will readily withhold delivery to reinforce this point. Whether or not this causes issues depends upon the degree to which your small business relies upon a particular supplier.
This brings us to an important consideration: whenever possible, before choosing to do business with a supplier, weigh the make-or-break effect it can have on your small business. If you’re going to inextricably bind the future of your small business to the future of a single supplier and its brand, consider the pros and cons very carefully. It could be a double-edged sword. When all is well with the sole supplier and its brand, you will likely enjoy a stable and reliable supply. Should the supplier’s fortunes change for the worse though, stability may be threatened and alternatives may no longer be available. This could be seriously detrimental to your small business or, in a worst-case scenario, even break it. Remember that circumstances change — it’s a good idea to develop a plan B to ensure supply continuity.
Cultivating guardian angels
For convenience, I’ve been portraying suppliers as individuals. In the case of big companies, the individual with whom your small business deals will usually be a salesperson, a customer service representative or, in some cases, a technical expert. Because these people have formal business relationships with your small business, they are likely to conduct themselves formally and with discretion. That’s why it’s useful to cultivate a friendly relationship with one or more of the supplier’s employees other than your formal contacts. You might meet these people at trade shows, through mutual acquaintances, at company functions, or via social media. The friendship might have its roots in common interests, such as children, pets, or hobbies, and while conversations will revolve around these things, business will inevitably creep into conversations. The business benefit of these guardian angels is that quite often you’ll hear of impending developments such as staff and management changes, intended new products, and other information that might be useful to know but that’s not yet intended for public consumption. It’s surprising how indiscreet and loose-lipped some employees of big companies can be, particularly if they have reason to be disgruntled.
Disputes and disagreements
Disputes and disagreements between small businesses and their suppliers are bound to arise from time to time. The key to preserving an amicable supplier relationship lies in how the small business owner (or an employee) handles the dispute. That doesn’t mean you should allow your small business to be pushed around by bigger and stronger suppliers, but an abrasive or threatening stance will almost certainly be inappropriate, ineffective, and potentially destructive. Even in the most frustrating and trying of circumstances with a big-company supplier, there are alternatives. You can appeal to reason, cry for help, prod a conscience, or try humour — but you don’t want to act hastily or thoughtlessly and potentially destroy a supplier relationship worth preserving.
You’re not family
I have known small business owners, particularly new ones, to be quite naive in their dealings with large suppliers. You need to understand that it’s all about the bottom line. Notwithstanding the best efforts of the public relations departments and advertising agencies, very little sentiment is involved in big business — it’s ultimately about the money and the quarterly financial report.
Individual representatives of big companies assigned to your small business account will quite often be affable and even likeable, but they are the facade for something a lot less personable and potentially ruthless. The supplier’s priority is moving as much product out the door as possible at the best price possible. It’s best to make it a rule, for yourself as the owner and for employees, to treat every supplier cordially but on a businesslike basis. Because that’s what it really is — just business. And you’ll be better off not expecting anything more than that.
On rare occasions I’ve seen the rule violated without ill effect, but in those circumstances the supplier was usually a small business owner too. Among the suppliers my business dealt with over a twenty-year period, just one has shown an interest in maintaining contact as a friend — my friendly relationship with the big suppliers ceased as soon as I no longer meant anything to their bottom line.
David and Goliath
When you’re a small-business David doing business with big-supplier Goliaths, you can’t expect to meet force with force — you have to outwit them. The rule in the business world is similar to that of the jungle: the strongest will prevail, unless the weaker are smarter. Large suppliers will use their superior size and strength to exercise influence and even intimidate small businesses when it suits them, much more so if the small businesses don’t have alternative sources of supply.
My small business of eight employees couldn’t have been more of a David in comparison with its main supplier, Goliath Ink (my pseudonym for them), a wholly owned subsidiary of a vertically integrated, publicly traded, multinational conglomerate with over 7,000 employees. Because of its dependence upon Goliath Ink, which would hear no criticism of its adverse pricing structure, my small business was at a disadvantage. Goliath Ink, through lack of Canadian market awareness and a lingering dose of arrogance born of being the industry leader for many years, dogmatically adhered to the belief that its product was vastly superior to all else in the market and therefore its significantly higher prices were justified. But market circumstances had changed. Competitors closed the quality gap while maintaining lower prices. I was left no choice but to supplement our product range with a less expensive brand of textile screen printing ink to satisfy the demands of certain price- sensitive customers. However, I didn’t want Goliath Ink to know this because I couldn’t trust them not to turn nasty.
Soon after the first delivery of the new brand of ink to our warehouse, Goliath’s representative responsible for our account paid us a rare visit. So soon, in fact, that I wondered if he’d heard about the second brand of ink and was on a mission to investigate. It was, the representative said in the phone call from Los Angeles, to be just a quick, same day, in-and-out visit to review a few figures and compile projections for the coming year. We extended the courtesy of a warehouse tour — a courtesy we extended to all our suppliers’ representatives, even though we knew they were only interested in seeing if we were carrying competitors’ products. To this day I don’t know if he suspected anything, but the only ink the representative saw in our warehouse was Goliath’s.
The day before he arrived I rented a one-tonne cube van, into which our warehouse manager loaded the entire inventory of the new brand of ink — and she drove it away to a parking spot just 50 feet away. As soon as the representative was safely winging his way back to California, the truck was backed up to the warehouse and unloading commenced. A head-to- head confrontation that could have ended badly for my small business was avoided. When backed into a corner by a big supplier, a small business needs to be smart. Sometimes survival can depend upon creative solutions.
The cooperative supplier
Diplomacy when patience wears thin, courtesy when provoked, assertiveness without aggression, and a dash of humour when appropriate can go a long way to maintaining cooperative supplier relationships. Though not guaranteed, stable and reliable sources of supply should be the reward. Oh, and finally, don’t forget that a cooperative supplier is a supplier paid on time.