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I shared This article from the Wall Street Journal with my clients. It’s about how Walmart warns its suppliers not to raise prices.
The article states that Walmart’s Chief Executive Doug McMillon “gave the warning in person last month in an appearance for companies that manufacture products sold by the company’s Sam’s Club chain. In a hotel auditorium, he said Walmart would push back against the effort from suppliers to prices, according to people familiar with the situation. Innovative products will encourage more purchases, he added, according to these people.”
My clients chuckled along with me when they read this story. “Wow,” said one, echoing most of the others’ feelings. “It must be great to be Walmart, don’t you think?”
Related: 4 ways to protect your business from inflation
That’s for sure. Unfortunately, most companies cannot do this. We can’t just say to our suppliers, “Hey, that’s it, no more price increases.” We are not Walmart. But there are plenty of things we can do to minimize price increases and maximize the relationships we have with our vendors and suppliers, especially in these difficult times of high inflation and supply chain challenges. And my best clients are doing these things now.
For example, I’ve seen many companies step up their communication with suppliers in recent years. They’ve doubled down on their customer relationship management platforms by scheduling updates, reminders, alerts, and workflows to automatically send emails and texts to suppliers about open orders, lead times, and delivery dates. They are on the phone weekly – in some cases daily – with their key suppliers to ensure that commitments are on track. They create web portals that display order status and integrate with their suppliers’ systems. They do this so that their customers have as much information as possible. By doubling down on communication, my best clients have improved their relationships with their suppliers and worked hard together to avoid surprises that would upset any of the parties involved.
And you know what my best clients do too? They pay their suppliers on time. Please do not listen to the consultants and “experts” who advise you to “pressurize your suppliers” and “use them for financing”. That’s not how you build a successful relationship. This is how you make a strategic partner angry. Because how would you feel if a customer independently and without warning extended their payments because they “enlisted” you for their own finances? What happens the next time the customer needs your products urgently? You are likely putting that customer behind the other customer who pays well and treats you with respect. This is how you should behave towards your suppliers.
Speaking of paying on time, many of my clients chase discounts by paying early. Some suppliers like to offer early payment discounts, so if you’ve got the cash, why not take advantage of it? In many cases – particularly when standard 2% discounts are offered within ten days of payment – the money you can save is significantly higher than leaving that same money in the bank. So if your cash flow can handle it, take advantage of those offers. Your seller will love you. And your accountant too.
Plan ahead to really maximize your supplier relationships. My dear clients who have been running their businesses for years all have one thing in common: they are always thinking about the future. They don’t like surprises. They do their best to know what’s coming before it happens. Look at your historical buying habits. Analyze your open orders and vacancies. Dive into your potential pipeline of ongoing projects. From there, you talk to your suppliers and make long-term commitments. That’s why they’ll love you, because who doesn’t love someone who promises something in the future (and who keeps those promises, of course)? In exchange for their love – and perhaps an upfront deposit – ask for better prices. You’ll probably get it if your order is big enough.
All that love is great, but regardless of being loved, let’s also admit that relying on just one supplier isn’t exactly the best strategy. Things change and circumstances sometimes go beyond people who have the best intentions. As we know, sometimes people don’t do what they say they are going to do. And when that happens, you have to tell a customer that their order is delayed because a supplier is delayed. You should avoid these situations and the only way is to make sure you have alternates. I don’t care how loving your supplier relationships are, people fall out of love all the time. So make sure you have backup suppliers. Spread out some purchases to keep them happy. Include them in your communications and nurture your relationships so that – when it comes down to it – you can move to plan B if necessary.
Related: 5 ways to effectively deal with supply chain disruptions
Finally, the best way to improve your supplier relationships is to not only buy more stuff from them, but also help them grow their business. Refer them to customers when you can. Make introductions. Include them in your business network. These are your partners. The more you help them succeed, the more they can help your business.
No, you are not Walmart and neither am I. We can’t just tell our suppliers not to raise prices. But we can minimize costs and maximize our relationship with them just by taking the steps I suggested above. Given the economic environment we are in, this is not just best practice. It’s a must practice.
Janice has been with businesskinda for 5 years, writing copy for client websites, blog posts, EDMs and other mediums to engage readers and encourage action. By collaborating with clients, our SEO manager and the wider businesskinda team, Janice seeks to understand an audience before creating memorable, persuasive copy.