When businesses think about building strong stakeholder relationships, the customer often takes center stage. While customers are undeniably important, it's crucial not to overlook other strategic partners, especially suppliers. Many business owners mistakenly believe that suppliers must simply comply with their demands, which can foster a hostile and counterproductive relationship. At our firm, we advocate for a partnership-based approach, creating a collaborative rather than adversarial dynamic.

The Pitfalls of Power Dynamics

Too often, business owners and executives leverage their "power" to pressure suppliers on pricing and express frustration over issues, thinking this will drive improvement. It's natural to feel exasperated when orders are delayed or costs rise, but reacting with anger or demands only addresses symptoms, not the root causes. This approach can damage long-term relationships with key partners.

Learning from Experience

Our journey from a frustrated leadership style to collaborative problem-solving was shaped by real-life experiences. Transitioning from emotional reactions to strategic, solution-oriented thinking is challenging but essential. By removing emotion, we found that meaningful progress can be achieved.

A Case in Point

A few years ago, we encountered escalating costs, low fill rates, and excessive waste with a major dairy supplier at a large food distribution company. Moving away from one-sided demands, we realized the need for a collaborative approach. During a crucial meeting with senior leaders from both companies, we openly discussed our mutual pain points. Initially focused on the supplier's high costs, we soon discovered that our own supply chain inefficiencies were contributing to the problem. This realization was a turning point.

Addressing Inefficiencies

As a distributor with multiple US warehouses, we identified inefficiencies in our purchasing and transportation methods. By implementing a strategic supply chain improvement plan, we achieved significant annual savings, reducing our cost of goods. A detailed analysis of our supply chain network revealed that suboptimal procurement of key items was driving higher waste levels.

Improving Forecasting and Fill Rates

The fill rate, which was at a low 80%, also needed attention. Our sporadic orders made it difficult for the supplier to forecast accurately. Collaborating with them, we developed a weekly forecasting system to better align production with our needs, reducing excess and waste.

Remarkable Results

By implementing a comprehensive action plan, we reduced our cost to serve and procurement costs, resulting in an annual savings of over $250,000. This not only enhanced our market competitiveness but also boosted our in-stock rate to an impressive 95%. The key takeaway from this experience is clear: listening, uncovering root causes, and solving issues collaboratively are far more effective than strong-arming or making demands.