As you may remember, Connie Customer and Sam Supplier are dealing with issues that may arise when Connie Customer’s customer decides to consolidate its supplier base.

So far, we have discussed the reasons that Connie’s customer may wish to consolidate its supplier base and the concerns that Connie and Sam may have upon learning of the supplier consolidation.

Today, we discuss how having strong relationships might help Connie, Sam, and Connie’s customer as they try to achieve their business objectives.

Ideally, Connie and Sam will have a very strong relationship and Connie will have a strong relationship with Connie’s customer.  The ideal relationship between Sam and Connie’s customer varies by preference and the nature of the products or services involved. 

Suppose that Connie and Sam have a strong relationship.  What are some of the benefits of such a relationship?  Asked differently, how might the relationship between Connie and Sam help customers?

The short answer is that there are many potential benefits to customers from using suppliers who have strong relationships.  These benefits may include:

• Lower risk of nonperformance 
• Better management of business conflicts 
• Access to better information in a timely manner
• Increased ability to anticipate the customer’s needs 
• Customer frustation with the suppliers may be reduced 
• Customer may be more confident that suppliers can deliver  
• Administration of the agreement may be easier and less expensive 
• Creation of better solutions because more perspectives are considered 

From Connie and Sam’s perspectives, a strong relationship can facilitate trust, lead to additional business opportunities, reduce administrative costs, and reduce the parties’ frustration. 

What are some of the other benefits that you see to Connie, Sam, and Connie’s customer?

In addition to those benefits, there are costs associated with relationships.  Connie, Sam, and Connie’s customer have to invest time in maintaining the relationship.  They also take risks in building the relationship - their time may not lead to business or they may spend more time on the relationship than is warranted by the situation.   

Next time, we will discuss specific steps that Connie and Sam may want to take after learning about the consolidation effort.

Filed by Coleen Davis at 4:32 pm under Negotiations, Planning Tips, Sourcing