April 5, 2019 Growing & Complex Businesses en_US Whether you’re content with your current partnerships, or you’re about to start a new one, it’s time to get serious about improving them. Your supply chain partners can be invaluable resources for your business. Foster better relationships with them and they’ll be more willing to help you grow your business. https://quickbooks.intuit.com/cas/dam/IMAGE/A8PD4dOXi/9beb9fb76ea925e8f5644927014416de.jpg https://quickbooks.intuit.com/r/growing-complex-businesses/does-your-retail-business-need-healthier-supply-chain-partners Does your retail business need healthier supply chain partners?
Growing & Complex Businesses

Does your retail business need healthier supply chain partners?

By Suzanne Scacca April 5, 2019

When people set goals for their health, it’s not always enough to say, “I’m going to go to the gym five days a week.” The pure act of defining a goal does not correlate to one’s success in achieving it. It’s the same in business. You might say, “I’m going to increase our profit margins by 15%.” But saying or even writing it down won’t automatically make it a reality.

As a retail business owner, you have a number of people you might turn to for support and motivation, like a life coach. What about forming stronger and healthier partnerships with people you already do business with, like your suppliers and vendors? Do your supply chain partners have an interest in your business goals?

The American Society of Training and Development reports that you’re 65% more likely to meet goals if you share them with someone else. That number goes up to 95% if you meet with your accountability partner to review milestones and progress.

Imagine having a partner that provides you with valuable insights into supply chain and inventory management. Or that lends you advice on how to develop a well-rounded approach to designing and marketing your products.

Rather than look at these partners solely as vehicles for generating and moving product, why not look at them as allies you can grow with?

How do you improve existing partnerships?

Whether you’re content with your current partnerships, or you’re about to start a new one, it’s time to get serious about improving them. Your supply chain partners can be invaluable resources for your business. Foster better relationships with them and they’ll be more willing to help you grow your business (as you do for them).

What’s the secret to this? Well, it starts with trust. Then, a mutually beneficial working arrangement. And, finally, investing in each other.

More specifically, here is how you can improve your existing partnerships.

Step 1: Put everything in writing

Make sure you get into the habit of putting everything of importance in writing and storing it in a centralized workspace.

This isn’t about a lack of trust. If you did your due diligence, you have an iron-clad contract that protects both of you from any negligence.

Instead, this is about working more effectively together. If this partnership is a good one, then all of you should be very busy right now, which is when stuff like this can fall through the cracks.

Here are some ways to capture more of your interactions in writing:

  • Have someone (ideally, an assistant) take notes during in-person meetings. These may be in-depth or solely focused on the key decisions the two parties agree to.
  • Record and transcribe your phone calls with a tool like Fireflies.ai.
  • When you can, do your meetings over a live chat software you can record, like Zoom.

This might seem like extra work, but think about the last time you spoke to a client and some important detail got lost somewhere down the road. You know that one of you suggested a specific change to the workflow, but you can’t remember who said it or when.

If you’re trying to work together as partners, you want to make sure everyone is on the same page and that important joint business decisions are always captured.

The centralization of communications is also helpful for task management.

For instance, rather than try to recount what each of you agreed to work on after a recent call, centralizing conversations in a shared task management ensures you never miss a step and everyone remains accountable. There are plenty of tools that enable you to invite clients and vendors to collaborate on tasks (e.g. Asana, Basecamp, etc.)

Step 2: Don’t mess around with money

If you want your partner to be reliable and trustworthy, then you have to be too. Paying on time and paying in full will help with that.

At some point, you may decide to renegotiate your contract and rates. That’s reasonable. What isn’t reasonable, however, is to pit vendor against vendor for the purposes of getting the best deal.

If you’re dedicated to growing together as partners, you shouldn’t have to worry about how deep a discount they can give you.

If you find that they’re really not living up to their end of the bargain, no amount of discounting will make it better. If your vendor relationship is costing you money or just can’t match what the competition offers in terms of quality and price, don’t play games. Be honest about the problem. If you want to give them a chance to improve and they seem amenable to it, let them. If you don’t, then abide by the terms of your agreement and sever ties when possible.

You don’t want to build up all this good will only for it to fall apart because you compromised a solid relationship for a seemingly better rate.

Step 3: Share your company goals

Your supply chain partners are a lot like employees. If you leave them to work alone in the dark, how do you expect them to understand the context of your relationship? If they don’t see how their role affects your business outcomes, how can you expect them to produce the kinds of results you need to hit goals?

Talk to your vendors about your company goals. Where does your retail business stand today? Where do you intend to take it? And what role can they play to help you get there?

Better yet, write them down — both of you.

Start by defining your companies’ respective objectives and key results as it pertains to your working relationship. By defining SMART goals, it’ll be easier to work towards them together since you have a plan and measurable steps you intend to take, either apart or together.

Bottom line:

If you can be transparent about what you’re trying to do—along with sharing your company’s values—they’ll have a greater stake in the work they do.

Work on building a set of goals together, too. If you always make it seem like “us” versus “them,” that’s how they’ll treat the relationship as well.

For example, your shared goals might track the following:

  • XX total goods ordered
  • XX total goods shipped
  • % goods returned
  • % product loss
  • % budget used/exceeded
  • % improvement based on [e.g. product change/upgrade, new workflow, etc.]

Even if only one of you has a hand in the completion of the goal, you should still track and share in these goals. If they can’t see where you’re struggling (and vice versa), how can they help?

Step 4: Meet them in-person

Serial entrepreneur Andrew Griffiths says business owners need to stop undervaluing face-to-face meetings, especially in the early stages of a partnership.

He even goes so far as to say that meeting in person is more time-efficient than doing so over Skype or email. His logic is that things are sure to get done when you meet someone in person. When you rely on a less straightforward form of communication, there’s a risk of excessive back-and-forth with no resolution or guarantee.

A McKinsey and Company survey found that only 60% of retailer-manufacturer collaborations succeed. One of the main reasons cited was because manufacturers didn’t believe they gained as much from the partnership as retailers did. Issues related to insufficient resources, inaccessible leadership, and the unwillingness to share information that survey respondents said caused the relationship to deteriorate.

By meeting face-to-face, this becomes a more personal interaction and gives you both the chance to have more in-depth conversations. Unlike an email exchange which leaves no room for small talk, and video chat which might lead to more stilted conversations, you get a good sense of who you’re working with when you meet in person. You can also get a lot more done in person — and make sure that you are actively working towards shared and equitable goals.

In so doing, this’ll increase trust from both sides of the partnership.

Step 5: Schedule check-ins

Designate someone on your team as the main point of contact for all supply chain relationships. If your partners haven’t done the same, ask if they’d be open to it and explain the benefits. Namely, you can work more efficiently with one another.

Regularly scheduled site visits and meetings will help solidify this relationship. Your team can then work on things like:

  • Resolving inventory issues in real time.
  • Strategizing better methods for getting products to customers.
  • Sharing product design or marketing tips to boost sales.

In addition, you and the other key decision maker should schedule a monthly call and exchange reports. (Remember what I said earlier about note-taking? This is where that comes in.)

By reviewing reports in real time, you can actively track progress towards your shared goals. Then, devise a plan or update the one you currently have to improve upon what’s working, fix what’s not, and delegate to the parties responsible.

Rather than operate as two separate entities that exchange services for money, you’ll both come to view one another as an extension of the other’s business.

Step 6: Be transparent about demand

Logistics provider Kane Is Able sanctioned a 2015 report about the retailer-supplier relationship. When retailers and suppliers were asked to rate their partner based on variables like timeliness or accuracy of demand forecasts, the report revealed quite a disparity.

It seems as though communication was the only thing they could agree on. Otherwise, suppliers didn’t seem to have a high opinion of retailers’ preparedness.

Rather than accept there’ll always be a disjointed view of the supply chain process, use transparency to fix this problem.

Sharing data related to your shared workflows goal progress is one way to improve forecasting and planning between the two of you. There’s no need to reveal sensitive data about your business or your customers either. This is simply about ensuring that everything is properly lined up from both ends — using the right materials, efficiently stocking up on inventory, managing staffing, and so on.

In turn, your partner can inform you of trends they’ve noticed as it pertains to supply and demand. Or they can let you know when their own capacity shrinks or grows.

That way, when circumstances change, you can work on pivoting together.

The purpose of all this transparency is to stop reacting to changes in the supply chain as they happen or, worse, after they happen. Instead, you can proactively prepare for them together to reduce lost profits.

Step 7: Make partner recommendations

If you want your businesses to grow, you both need to work with reliable partners and employees.

As you discover a need for a new distribution center, accountant, or another third party, your trusted supply chain partner may be the best person to turn to for advice or a referral. After all, they understand your business’s goals, your preferred working style, as well as your values. Their recommendation would save you time in having to hunt down candidates on your own while also simplifying the vetting process.

The same goes for the reverse. You may have the perfect person in mind to help lead their customer service center. Or, better yet, you can put them in touch with another vendor from your supply chain with whom they can partner.

What to do if you feel like a partnership isn’t working?

The fact that you might be doing business with the wrong people is a tough prospect to face, especially if you have tried to create a healthy relationship with them.

If you care about the future of your business and maximizing profitability, you can’t afford to compromise on this.

Here is what to do if you suspect a partnership isn’t working:

Step 1: Define the reasons why the partnership isn’t working

A partnership may not be working for a variety of reasons. It doesn’t always have to do with the quality of work, either. In fact, it might just be a bad fit in terms of working styles together.

Communication is a critical component of getting stuff done with your supply-chain partner. If your two organizations (or the individuals that collaborate the most) don’t work well together, it’s okay to explore other options. You never want personal conflicts to stand in the way of professional success.

That said, before you do anything else, decide which of these items are actually missing from your current relationship:

  • Product quality
  • Reasonable and fair costs
  • Reliable service
  • Timeliness
  • Helpful support
  • Positive communication
  • Commitment to terms
  • Trust

These are very generic ways to define the issue, but they should give you a good place to start. You don’t want to just go from a gut instinct that a relationship is wrong. You want to be able to pinpoint the source of the problem so you can find a resolution.

Step 2: Determine how inventory has been affected

Now that you’ve identified the underlying issue, collect data to back up your theory. This will require some thinking outside of the box.

Start with customer feedback. Why are people dissatisfied with your products? Can it be attributed to your supply chain partners?

It could be as simple as the distance between you and your supplier.

For instance, H&M experienced a 62% decrease in operating profit in 2018, which may be attributed to its choice to use suppliers in Asia. To prove this point, Mary Hanbury, a reporter for Business Insider, visited H&M and the neighboring Zara retail stores to do a side-by-side comparison of inventory.

What she found was a lackluster display of inventory on H&M’s part, which she attributes to the six months it takes an item to go from concept to sale. Zara only needs five weeks to do the same, which is why its inventory looked more fresh and on trend.

Distance isn’t always a factor though. It may just be that you’ve outgrown your supplier.

When your business was younger, the relationship with a smaller vendor may have sufficed. But as your inventory and demand have grown, they may no longer be able to keep up.

Take some time to drill down and locate the root cause. Gather up those facts and be ready to use them.

Step 3: Turn to Google

Much in the way your customers use online reviews to help them decide if they want to buy your products, you should use them to dig into your partner’s reputation among other retailers.

If they’re U.S.-based, start with the Better Business Bureau. Read through reviews left for the company and check the dates on them. You might be able to get a sense for whether an issue you have with them is temporary (as it seemed to affect all their retail partners) or is a systemic one.

Then, go to Google. If they have a My Business page, use the reviews there to see if you can get a sense for issues commonly reported about them. If not, just look for what search results come up when you search for “[vendor name] complaints” or “[vendor name] scam”.

Do others report unreliability in their service? Has anyone else complained that their rates are too high? Is it just you who’s dealing with a drop in product quality?

Even if you can’t find anything, that doesn’t invalidate the feelings you have. If the relationship doesn’t work for you, that’s okay. You need a partner you can trust.

Step 4: Research other options

One final check to do before ending a relationship with a supplier is to research other options. In other words, before you go looking for greener pastures, make sure they actually exist.

Here’s what you can do:

  • Ask for supplier suggestions from retailers you trust and that are doing well.
  • Order sample products from the vendor and test the process yourself.
  • Go online and find case studies, testimonials, or reviews about them.
  • Check out their payment terms and refund policy.
  • See if you can find details on minimum order limits and look at bulk discount options.

Once you’ve gathered all the information, compare it to what you have now. This new potential partner may seem like a good fit, but don’t let your surface level research be the only things that lure you into a new relationship.

Step 5: Talk to your current partner

Now that you’re armed with all the details and have an idea of what the right kind of relationship looks like to you, it’s time to talk to your supplier.

You don’t need to mention that you’ve researched other options; that’ll just make the whole conversation sound like a threat. Instead, utilize the four-part nonviolent communication process devised by Dr. Marshall B. Rosenberg.

Essentially, this requires you to be honest about “how I am” instead of “what you did”. And if or when your partner chooses to counter your arguments, you must remain calm and avoid the blame game.

These are the four parts of the “how I am” explanation you should be prepared to use:

  1. What I observe – Share details of the problems you’ve seen/heard/documented. Reference exchanges that took place between the two of you that encapsulated the ongoing issues. Or leverage reports from your inventory management software to demonstrate how your business has been affected.
  2. How I feel – Clearly explain how this makes you feel: frustrated, disappointed, etc.
  3. What I need – Explain what you want from this exchange. Do you need to sever ties and move on to a partner that’s the best fit for your retail business? Do you need to better understand what went wrong? How do you move forward?
  4. The concrete action I would like taken – This is where you ask if they’d be willing to fix the problem? This will then open up the floor to them sharing their thoughts. Do they view this as a problem? Do they have an excuse for what’s been going on? Do they make it seem as though they want to work it out? Or do they pass the blame or refuse to own up to their failings?

You never know. They might just be going through growing pains or an adjustment period of some sort. Granted, they should’ve communicated that to you, but if they’re honest about it now, you may be able to recover from this.

If not, then there’s one more thing to do.

Step 6: Don’t let fear hold you back

It can be hard moving on from a vendor you’ve worked with for a while. Even if there was no real personal connection or trust between your two companies, there may be some guilt that comes about in canceling their contract. But if you ever come to that situation and are on the fence about winding down the relationship, here’s the thing:

Your business is your most important priority.

If the vendor can no longer meet your needs, don’t let a sense of obligation to work with them hold your business back. Yes, you’re willing to work with them as a partner when they act as such. But the second it becomes apparent they don’t have your best interests in mind (the singular “your” or the joint “your”), old loyalties don’t matter.

Also, don’t be afraid of having to start afresh with a new partner, even if they’re newer to the game or they’re more expensive out of the gate.

Newer suppliers may be more eager to please, more loyal, and more invested in your business as they work their way up in the industry. This could be a great opportunity for you to mold the perfect partnership and show them the ropes when it comes to best practices in retail.

Although you might be reluctant to ditch the long-time partner for one that’s more expensive, think about the long-term benefit. A more expensive partnership now might lead to greater profits in the long run if they consistently deliver a quality product and can help you grow your business.

Healthier partnerships for growth

Let’s stop thinking about supply chain providers as a cost of doing business.

The first thing to do is to adjust your mindset. They’re not providers or vendors or a monthly invoice you have to issue anymore. They’re your partners. But you have to establish healthier relationships with them if you want this to be a reality.

Transparency, fairness, and accountability all play big parts in this.

That said, there are some supply chain relationships—no matter how hard you work at them—that will never be a good fit for your business. It’s your job to identify why they failed to meet expectations, sever the relationship civilly, and then invest in one that truly can support your business and help it grow.

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