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Friday, 20 November 2015

How attractive are you to suppliers?


In the majority of procurement literature, workshops and exams buyers are asked to consider the above 'supplier preferencing' model. It identifies 4 potential ways a supplier can 'view' the buying organisation. 

As with many business models it's value is delivered from the conversation that arises. A conversation that helps us understand how our suppliers, and we as the buying organisation, might relate to it. It involves the buyer considering:
  • How attractive they think they are to a supplier
  • How attractive they might really be - if they consider the behaviours they're experiencing from a supplier
  • What behaviours suppliers might consider to be attractive - remembering each supplier will be different 
The premise is: a supplier who sees your account as highly attractive, AND as contributing a larger share of their sales is likely to see your account as Core. With the same level of attractiveness, but smaller percentage of sales, it becomes an account they would like to Develop. The potential problems arise when an account isn't very attractive - with the resulting potential for either Exploitation or being treated as a Nuisance dependant on the relative value of the sales.

The main reason for using this model in workshops is to invite buyers to consider the behaviour they may be demonstrating that might be seen by a supplier as unattractive, and therefore is very likely to be contributing to less than helpful behaviours from the supplier. Or, if they aren't doing currently, might do so in the future. 

In no particular order the unhelpful buyer behaviours suppliers may see as unattractive include:
  • Squeezing profitability  
  • Late payment to agreed terms
  • Extending payment - see my rant on 'who owns payment terms' directed at CFO's who forget it's part of the contract that buyers agree with suppliers - ie not something Finance should alter at whim!
  • Always doing the opposite to what's been agreed
  • Changing minds, and expecting the supplier to pick up the impact re costs, timescales etc
  • Too many people involved - different people telling suppliers different, and contradictory things
  • Not being paid for extra costs - irrespective of the original agreement  (see point above)
  • Overly bureaucratic 
  • Lateness - for meetings, information, orders, feedback, changes and so on 
  • Using suppliers to benchmark prices, and having no intention of changing supplier
  • Inaccurate or limited forecasting
  • Difficult to work with - behaviourally or personally 
  • Arrogant 'you need us' behaviour and language (linked to the above point)
  • Bullying - see two related blogs on the subject Don't turn a blind eye  (to unacceptable business behaviours) and Are your supplier afraid to say no?
  • Disrespectful behaviour - see do your suppliers' sleep at night blog?
  • Unethical behaviour 
  • Continued lowest price focus - irrespective of potential for cost and value benefits
  • Lack of appreciation - so easy to forget that a Thank You is appreciated even if "they are getting paid for it". (Most buyers get paid for what they do and expect thank yous and recognition from their manager and those they work with - why think suppliers don't!)
Consideration is also given to what behaviours might be considered attractive - many of which are the opposite to the above.

Yes sales is attractive, but this model is asking buyers to consider what might detract from the value of the sales, and mean the buying organisation's needs are not as important to the supplier as we would like them to be.

I think the above model misses an additional strategy - and that is a supplier could simply walk away


It's a strategy a supplier has irrespective of turnover, but certainly something they're more likely to consider if the account is becoming increasingly unattractive. This is a point I often find myself disagreeing with other buyers and colleagues about - the assumption that any sale is better than none. I believe for every supplier there will be a point where the level of unattractiveness means a supplier will decide the best option is to walk away.

When sharing the model in workshops we often use the metaphor of personal relationships. With first dates, dating, marriage and divorce being mentioned. We've all known people who have stayed in a relationship well past its sell by date, and as a consequence their health, well being and sometimes financial health are compromised. It's no difference with suppliers - there will be a point - if pushed to far - when they say "enough" and walk away.

Assessing power between a buyer and supplier can only take you so far. Once someone's values such as respect, honesty, integrity and fairness are being compromised you'll be surprised what people are willing to do despite the consequences. (My blog 'Ethical behaviour comes with integrity' also discusses what people are prepared, and not prepared to put up with as a result of their values).

I would love to know your thoughts - as a supplier have you walked away when everyone else would expect you to stick around, and put up with what you believe to be unacceptable behaviour. As a buyer have you been surprised when a supplier has made the decision to just walk away, and what were the reasons given.

For blogs on other topics covered during procurement workshops see blog entitled I've written a blog on that.

Alison Smith
The Purchasing Coach
Inspiring change inside and out (more here on why that's important)

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