Building, Maintaining and Measuring Strong Relationships with Your Suppliers

Jan. 24, 2011
One common denominator for measuring a supplier is profitability.

What does it take to build and maintain strong supplier relationships for distributors these days? Are these strategies different than strategies that worked in the past? And what are some effective ways to measure these relationships? Several distributors have some thoughts on these questions.

For Applied Industrial Technologies (Cleveland, Ohio), working closely with suppliers is important. For example, Applied works closely with its industrial customers to understand their needs. Part and parcel with this is then working closely with suppliers to provide new products and services that customers can utilize.

“Once we understand customer needs, we share these with our manufacturing partners,” reports Tom Armold, vice president, strategic accounts and marketing. “Our manufacturing partners have to be part of the value package that we provide to customers. If they provide support in this area, then they need to be rewarded with our ongoing business.”

Applied works with its manufacturing partners on things such as joint marketing programs and inventory support. It also gives them access to other business opportunities. “In turn, they provide us with their support, which benefits us in the long term when working with customers,” adds Armold.

In situations where there are multiple authorizations for the same product group, supplier relationships become even more important and complex. “We have to decide which manufacturer meets each individual customer’s need, and that is a balancing act,” admits Armold. “The way we achieve this is to engage in negotiations with all three parties—ourselves, our customers and our manufacturing partners. If we handle the negotiations and other communications properly, then it keeps everyone pleased and motivated for the next opportunity.”

According to Mike Pulick, senior vice president of Grainger Industrial Supply (Lake Forest, Ill.), and president of Grainger’s U.S. business, the distributor is fortunate to have some great partnerships with over 1,300 suppliers. “They provide high-quality products and have great brand names,” he states. “We consider ourselves a conduit to connect these suppliers to millions of customers.”

Grainger serves a diverse group of customers, from hotels and schools to manufacturing plants. To build win-win relationships with suppliers, Grainger helps them navigate the marketplace because it has so much good information on its customer base. To share this information, Grainger has face-to-face meetings with suppliers. It also offers a supplier portal, a secure site, that allows suppliers to sign on anytime and communicate directly with Grainger. The distributor can provide the information and resources they need to deliver the products and services that are essential to provide customer satisfaction.

Grainger also has an annual show for customers. “One element of this is inviting our top suppliers to attend, allow them to interact with customers, and show them products and services that can help them save time and money,” reports Pulick.

Grainger’s relationships with suppliers haven’t changed much over time. “We have always been consistent in the ways we communicate with them and provide information to them in a transparent fashion,” states Pulick. “The only thing that has changed is a stronger collaboration in terms of product offerings. We have been increasing our product lines dramatically over the last five years. Five years ago, we had 82,000 products in our catalog. Today, we have over 300,000.”

While Sunbelt Industrial Trucks (Dallas, Tex.) has seen relationships with customers change in recent years, it has seen relationships with suppliers change even more, according to Bill Rowan, president. “Because of the changes that have taken place in the last 18 to 24 months, we have had to look at our suppliers in quite a different way,” he states. “Suppliers have had to make a lot of tough decisions, just as we have. In some cases, we have had to look for additional suppliers to take care of our needs.”

For example, Sunbelt has had to find additional suppliers to fill in some lines that existing suppliers might have suspended or changed their philosophy on. “We explain that, if they can’t provide everything we need, we have to look elsewhere and create other alliances,” notes Rowan. “At the same time, though, we have to continue to assure these existing suppliers that they are still valuable to us.”

M&G Materials Handling (East Providence, R.I.) represents Yale Materials Handling. “We have seen big changes on the manufacturing side as well as in the distribution channels, which is creating stronger relationships,” reports Kenneth McDonald, president. “We are sharing resources more often.”

Measuring Supplier Relationships

Grainger measures, rewards and recognizes its suppliers using quantitative data. This includes delivery performance, lead time performance, the type and quality of information that they provide, etc. “Suppliers can see these measures anytime,” states Pulick. “The information is very transparent on a daily basis.”

Grainger also utilizes some subjective measurements, such as how relationships are being conducted in terms of Grainger’s ability to have access to the right resources, and how the suppliers interact with the distributor.

Grainger combines the objective and subjective ratings, then sits down with its larger suppliers, sometimes as often as quarterly, to discuss the relationships and use the measurements to look for ways on how things can improve and create better win-win relationships between the distributor and its suppliers.

“Each year, we also have a large supplier day, where we recognize our top suppliers,” states Pulick. “We call them Partners in Performance award winners.”

Sunbelt meets with its suppliers to have candid and realistic conversations with them about goals and strategies that they want Sunbelt to accomplish, and that Sunbelt believes it can accomplish. “We then look at whether we are able to accomplish these goals,” states Rowan. “In other words, while it is important that we hold our suppliers responsible, it is also important that they can hold us responsible.”

For M&G, the most common denominator for measurement of a supplier is profitability. “If you have a product line that isn’t providing the revenue stream that it should, the relationship could change,” explains McDonald. “However, we have been with Yale since 1966, and the relationship remains very strong. Some of the other smaller lines that we represent, though, are struggling.”

William Atkinson is a freelance writer specializing in supply chain management.

Latest from Global Supply Chain