Remarkable Supplier Relationships are Built on Story, Strategy and Systems
Few companies have as solid a reputation for supplier relationship management as Toyota does. The world’s biggest automaker has developed long-term, profitable and collaborative partnerships with its key suppliers over a period of several decades. In good times and bad, Toyota and its suppliers have faced the same issues together and Toyota has built strong and close relationships with them according to the spirit of mutual trust. According to Toyota, they “cherish their ties with suppliers who proactively embrace and jointly promote our story: “Customer First, Dealer Second, Manufacturer Third”.
In January 2017, the automaker opened new purchasing and prototype-development centers on its Toyota Technical Center campus in Ann Arbor, Michigan – part of a $154 million investment by Toyota North America. As the name on the building suggests, the purchasing center is known to guests as the “Supplier Center” and it is Toyota’s hope it will cultivate leven stronger, more fruitful relationships between the automaker and its suppliers. A clear sign of their dedication and commitment to the success of their supplier partners.
And earlier this year, their dedication paid off. Toyota was recognized as the only automaker to improve in the OEM-Supplier Working Relations Index, while Ford, GM, Fiat/Chrysler, Honda and Nissan all slipped. The study, conducted by research firm Planning Perspectives and which surveyed salespeople at nearly 500 Tier-1 suppliers on their relations with the Big Six U.S. automakers, reports that Toyota’s score increased from 328 last year to 333 this year. Suppliers consistently rate Toyota higher than the other major automakers and characterize their communication as “open, honest, timely and effective”.
Toyota has turned excellent supplier management into a competitive edge and it has propelled them to be the largest automotive company in the world.
So, what’s the secret to their success?
What you find when you peel back Toyota’s supplier relationship management program is that they have intentionally made suppliers a part of their Story, Strategy and Systems:
- Suppliers Are Part Of The Story – They’re Not Just Vendors
Toyota views supplier as partners, and this partnership is based not only on financial transactions, but also on mutual trust, loyalty and common values. It’s imperative that suppliers understand your “why” and they feel like they are a part of your brand story to the end-customer. Then, when you inform them about changes to your procurement processes, releases of new products and promotions, changes to production schedules, etc. – things that could have a negative impact on their business – they will be more likely to understand that these changes are in service of a greater purpose. Furthermore, when you engage them in your brand story, it’s quite possible that they will turn around an make your story a part of theirs… and become advocates for your brand in the process!
- Suppliers Are Part of The Strategy – You Get What You Pay For
Of course, Toyota’s business strategy is to build the highest quality cars and optimize returns for shareholders. And, nothing is better for growing your profits than getting a quality service or materials for the right price. Sure, you can buy in bulk and get better pricing but you will have more stock on your balance sheet, or you can arrange to pay a vendor earlier in order to get a bigger discount. Sometimes it’s better to pay a little more because the supplier is giving you a better service which pays for itself because you need to provide less time to manage them, or because they can be trusted to deliver directly to your customer. Relationships are important, but you shouldn’t stick with a supplier just because you like them. Choose the most efficient supplier partners that fit with your strategy for your business and realize that efficiency is a product of value not just the cost.
- Suppliers Are Part Of The Systems – Keep It All Aligned
Over the years, Toyota has made significant investments in Systems – the people, process and platforms – required to execute their Strategy and stay true to their Story. There are many great supplier management solutions available in the market to keep track of information about your suppliers all in one place. You can even go further and implement advanced B2B payments platforms, which you can use to create, process, and track orders with your suppliers. Toyota recognized early on that timely payments to suppliers are crucial in fostering productive supplier relationships over time. If you don’t want to lose your suppliers, step one is making sure to pay them on time. This way, you will prove that you are a reliable customer and that you’re easy to work with. If for any reason you cannot make the payment on a date agreed, then inform the supplier as soon as possible with the date on which they can expect the payment. Suppliers like timely payments just like you like timely action on their side. It really is that simple. If your Story revolves around being safe, secure and trustworthy partners you got to make sure that your Systems are aligned and fully capable of delivering on that promise.
Of course, simplicity, clarity and alignment in communications is the bedrock of any great relationship. Make sure to maintain consistent and regular communication with each of your suppliers. Keep them regularly informed and up to date, on your Strategy and plans so that they know where they fit in and how they can help, plan for and benefit from those plans. Make them your partner. If you appreciate their work, let them know. If something’s not working for you, let them know. A stronger, deeper relationship emerges from straight talk and reciprocity.
A fully engaged supplier base can become a competitive advantage for your brand as it has for Toyota. It can help you deliver new products that capture market share from competitors, streamline your manufacturing processes or drive sustainable growth performance. As we always say at TopRight, you just have to give them a reason to care, a reason to listen and a reason to engage…. and it has to be in that order!
Learn more about transforming your supplier relationships by gaining simplicity, clarity and alignment around your Story and Strategy & Systems – just download our ready-to-use Transformational Marketing Playbook to get started.