Knowing that price reduction and razor thin margins are top of mind for executives, an important question has emerged for today’s supply chains: at what point does a race for competitive prices become a race to the bottom?
B2B supply chain optimization is top-of-mind for many executives, and for supply chain-based companies in the US and Canada, a strong focus is placed on pricing and maintaining price competitiveness. For many, this results in steep price reduction strategies, which in turn leaves management to scramble for optimization techniques that compensate for selling goods at lower costs while they struggle to maintain razor thin margins and proper inventory turnover levels. What participants in this race fail to take into account is the value of supplier-distributor relations within their operations. Studies have shown that more than competitive prices, strong relationships with suppliers, distributors and other servicers leads to continued business success. Businesses that view their suppliers and distributors as partners rather than customers go farthest toward optimizing their B2B supply chain networks and maintaining long-term, financially beneficial relationships.
To maintain a true partnership, suppliers and distributors share information and agree upon marketing, sales and growth goals. Despite the obvious benefits of sharing this type of information, many businesses are still hesitant to do so as they fear that the potential partner will attempt to take customers from them. Rather, this relationship-style view could enhance their business and drive customer loyalty. Businesses who understand their partners well are better equipped to collaborate with them, help them thrive and engage in a mutually satisfying partnership.
”B2B companies that fail to understand how their products or services help their customers succeed lose two important competitive advantages: the steadfast advantage of customer engagement and the lucrative advantage of customer impact.” Marco Nick, Gallup.
To create a positive customer impact, B2B companies must look beyond their own performance and help their customers improve on theirs. The more they are able to understand, relate to and improve their customer’s performance, the more inclined a customer will be to continue the relationship. With relevant improvements offered, there exists a greater chance that the partnership will become successful due to the fact that the relationship has shifted from one of price to one of “advice.”
“Suppliers who provide tools and resources that help distributors succeed can strengthen their distributor partnerships in ways that will yield tangible results.” -Jordan Katz, Gallup Research
Maintaining an open a dialogue within the partnership allows both teams to discover what each other’s business goals are and more efficiently work to meet needs and solve issues that may pop up along the way. Creating a business partnership plan to map out the relationship, including performance and action accountability as well as metrics allows you to then develop and implement your customer impact strategy more efficiently and stay focused on the bigger picture.
For B2B supply chain executives, one of the greatest pieces of advice to heed is that in today’s business world, it is time to reconceptualize the relationship between B2B supply chain companies from one of a customer/vendor relationship to one of a mutually-beneficial partner relationship. The shift into the “partnerships thinking” takes effort and requires a new way of establishing and maintaining what are currently known as general customer relationships. It will require revising your typical customer relationship functions and altering your accountability plans, performance metrics and even the business’s definition of success. Ultimately, your success will come from recognizing the “true business” of a B2B company – a new way of thinking about engagement to create the impact that leads to long-term relationships, recurring revenue and business growth gains.
Featured image by CPG Grey.