New Opportunities in the “New Normal” for Domestic Suppliers

We’re living in a world full of changes.  Most headlines emphasize the bad ones, and I don’t want to minimize them. However, there are some significant opportunities among the wreckage, especially for domestic product suppliers.  It’s time to think about whether and how you can capitalize.

New Normals….Plural…and one Over-arching Change.

We aren’t in for a stable “new normal” but rolling normals…in progression. However, one development is that we’ll stop ignoring something we’ve known for decades:  long supply chains carry risks.   Most people knew about it, and smart ones knew it was inevitable.  Most businesses though, didn’t foresee all the potential costs…That’s clearly not “black swan”; it’s shortage of vision, which boils down to lack of trusted advisors in selling organizations.  Sure, your customers were ultimately responsible, but if your salespeople didn’t help them make a well-informed decision…shame on you and your sellers.

Your Customers Need Help Rethinking Supply Chains.

Read this article that describes what manufacturers and those who buy manufactured goods/components/commodities are finding out.  After the headline bit about “including vaccines”; the article is really about how complex the supply chain for everything.

If you sell anything made domestically, you’ve struggled against lower-priced foreign competition forever. The value of being a domestic supplier didn’t (in your customers’ perception) always overcome your price premium. That isn’t your customer’s fault.  It’s yours.

(Re-)Discovering the Value of “Made in USA”

Let’s say you’re an American (or domestic, in whatever country) manufacturer, and have struggled against foreign competition.  It’s now time, while memories are fresh, to gather customer data on their costs associated with extended supply chains. Use your customer’s data, from their perspective and experience, but you need to know how to gather it.

Using a tool I developed, a value network, you can explore all of the outcomes a customer might experience from sourcing from American producers. Obviously, any component of your product not sourced domestically makes your product vulnerable.  You’ll need to mitigate that vulnerability somehow.

Here’s a quick value network I drafted for a hypothetical product.  After the “made in America” feature (the language of the seller) rectangle at the top, all of the ovals below are expressed as customer outcomes (that is, they’re in customer language).  Each is a value hypothesis that you should explore with your customers. 

Navigating and Using the Value Network

The path down the right side of the network represents the common “made in America by American workers…save American Jobs” value proposition we’ve all seen.  The dotted line from marketing pitch to profitability is dotted because, it typically works, but not well enough to move buying decisions.

The rest of the value network includes 1) arguments proposed for years by some.

• Responsiveness, both in fulfillment and customization.  This was known, but in a global disruption, might have become more costly and significant. 
• Protection of any intellectual property developed by suppliers and/or customers and incorporated in the product or its manufacture. 
• Any customer taking advantage of customization might feel that they’ve partnered with a valued vendor resource. Many of these customizations have business outcomes that your salespeople should have quantified with customers.
• Some of these outcomes can drive operational efficiencies for both the manufacturer and their customers.  If you haven’t quantified them yet, do it now.

Also, pandemic has 2) grown some formerly “theoretical” costs to “significant”, even  “astronomical” in some cases. 

• During either trade wars or natural disruptions, flow of essential products –even components of those products -- can be interrupted at critical times, which can shut down an entire business. 
• Trying to stay open without some key commodities still bears costs and risks.  For example,  continuing to operate without sufficient personal protection equipment (PPE) has placed hospitals, factories, retailers, etc. in an impossible squeeze between patient care on one side vs. worker health and/or legal violations (OSHA, union contract law).  
• When disruptions cause employees to furlough workers, that sets off a series of costly outcomes:  separation costs, risks of best workers being hired away, restart costs, retraining, sense of responsibility for workers, etc.

It’s time for you to find out how all of these value points have financially impacted customers.  You will glad you captured their impressions while fresh in your customers’ minds (bedside manner will count a lot).

Value of Risk Avoidance vs. Price Premium

Luckily, humans hate losses twice as much as the desire gains.  The more clearly customers articulate losses to themselves and co-workers, the more significant they become as decision criteria. The problem with risks like these is that they are difficult to fully envision beforehand.  Capturing the experienced impact of these costs right now will help customers account for them more fully in future buying decisions.  It takes some tact, but you’re then providing perspective that they need to run their business more effectively and efficiently.

Also, many risks are low-probability/high cost events.   That’s fine:  simply take the huge cost associated with a risk once a customer calculates their own (validating yours is a second place option) and multiply it by the probability of recurrence, to calculate the statistical expected value.  For instance, if your customer thinks an event (the next pandemic…or trade war…or shooting war) that will interrupt international trade is 2% likely in any given year, take the huge total cost that you analyzed with them times 2%.  That’s what they should be willing to pay every year to minimize their exposure to that risk.  How does that compare to your price premium?

Walking a customer through this math is a huge help to them:

• During and after any major disruption, many decisionmakers freeze, because they don’t know what to do.
• In situations like this, purchasing decisions are on hold until the group feels comfortable again.  We’ve all seen decisions go on hiatus for six months or more after a restructuring or recession…this is no different.  The first sales team that helps a buyer get comfortable analyzing their new reality often wins.
• Walking them through a simple arithmetic problem with numbers they produce themselves guides them to the decision they know they should be making anyway, but didn’t know how.  You’re the valued resource helping them act with good judgement at a difficult time.

Want to Talk About It?

If you are struggling with how to sell right now, you’re feeling just what your customer feels about buying.  That’s normal.  If you put together a plan to help them orient themselves in a new situation, you’re doing both of you a favor.  If you’d like some help figuring out how the new set of customer conversations in this “new rolling normals”, I’m happy to help.  Contact me.

Not a domestic supplier?  We can do a value network for what you do offer. You will almost certainly discover something great. Contact me.

To Your Success!