10 Must Have Customer Supplier Relationship Areas – How Many You Have?

There is an argument that suppliers achieved excellence when they work with excellent customers. This means that the customers should strive for excellence and assist the suppliers to do the same to achieve best customer supplier relationship?

Customer must ensure that both parties are working toward continuous improvement of customer supplier relationship. Good supply chain management alone will not make a manufacturer a good JIT operator. The relationship should be stronger if both parties are to gain benefits from it. It should be mutual, with both sides seeking to achieve excellence in customer supplier relationship.

10 Must Have Customer Supplier Relationship

Moody, P.E .,1992 has defined 10 areas which need to be considered in any customer supplier relationship. Let’s discuss them briefly one by one:

1. Early Supplier Involvement

Suppliers must be consulted early in the design of a new product or process and invited to contribute their specialist capability at this stage. This early involvement will enable them to prepare for the new product or process requirements and that could possibility result in a shorter lead time of product conception to production.

2. Mutual trust

Moody (1992) reported that some manufacturers announced that they will select suppliers based not only on cost but other factors such as technology sharing and cost reduction programs, but eventually, they will make the final decision.

Sometimes customers agreed to establish business relationships based on mutual trust but they imposed rules and regulations that do not reflect the building of trust. In such instances the supplier is inundated with quality audits and performance audits that adds more cost to the production process. Manufacturers and suppliers must honor each other’s trust and treat each other as equal partners in the business arrangement for better customer supplier relationship.

World class manufacturers should be attentive and action-oriented, according to Moody (1992), by resolving problems that limit the supplier's ability to serve them properly. Motorola is a good example of a company which nurtures supplier relations, as they are very consistent in areas that affect a supplier's overhead costs (Moody, 1992). They help smaller suppliers who may be vulnerable. These suppliers have to struggle to adopt multiple standard and other procedures as required by the manufacturing company.

3. Quality initiatives

Quality standards can be set mutually from the start and any problems in supply can be rectified together for better customer supplier relationship. Typically, this concurrent or simultaneous engineering approach will help engender strong commitments to make the new product a success if both the supplier and the manufacturer are involved and feel responsible for it. Unfortunately in my experience manufacturers and suppliers are not following these ideals in the real manufacturing world. But I believe we should for better transparency.

A cohesive quality planning is essential to foster continuous improvement, defect prevention and process optimization. It is required during all phases of product and process development. A living quality planning is a must be maintained throughout all phases of the product life cycle for continual customer supplier relationship.

4. Profitability

Manufacturers are under tremendous pressure to increase their own profits. Manufacturers have historically looked to suppliers to provide annual cost savings. And today, manufacturers are asking even more of their suppliers, including compliance with regulatory reporting requirements. Taken as a whole, these demands can put a lot of pressure on a supplier’s profit margins.

Just like customer suppliers needs to make money. Out of all the disrupters & risk I have in supply chain the biggest one is supplier going bankrupt, following by ERP implementation!

Like you, supplier needs to be turn out to be winner. If they make good margins from your business, they would want to do well and performance better which will lead to better customer supplier relationship.

And if you squeeze them too hard and they don’t make any profits from your business and suppliers will walk away. And the cost of replacing the supplier will be more than cost reduction you want from them (depending on commodity off course) in some cases.

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