Opinions expressed by Entrepreneur the contributors are theirs.
I have shared this Wall Street Journal article with my clients. This is how Walmart warns its suppliers not to raise prices.
The article says Walmart chief executive Doug McMillon “gave the warning in person last month during an appearance before companies that manufacture products sold by the company’s Sam’s Club chain. In a hotel auditorium, he said Walmart would push back on vendor efforts to raise prices, according to people familiar with the situation.Innovative products will spur more purchases, he added, according to those people.
My clients laughed with me when they read this story. “Wow,” said one, echoing the sentiments of most of the others. “Must be awesome being Walmart, don’t you think?”
Related: 4 Ways to Protect Your Business Against Inflation
This is surely the case. But unfortunately, most companies cannot do this. We can’t just tell our suppliers, “hey, that’s it, no more price increases”. We are not Walmart. But there are many 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 right now.
For example, I’ve seen many companies step up their communications with suppliers over the past few years. They doubled down on their customer relationship management platforms by scheduling updates, reminders, alerts and workflows to automatically email and text vendors about open orders, lead times and delivery dates. They are on the phone weekly – in some cases even daily – with their key suppliers to ensure commitments are on track. They create web portals displaying order status that integrate with their suppliers’ systems. They do this so that their customers have as much information as possible. By doubling down on communications, my best customers improved their relationships with their suppliers and together worked hard to avoid any surprises that would upset any of the parties involved.
And you know what my best customers do too? They pay their suppliers on time. Please don’t listen to consultants and “experts” who advise you to “tighten your suppliers” and “mobilize them for funding”. That’s not how you build a successful relationship. This is how you antagonize a strategic partner. Indeed, how would you feel if a client extended their payments independently and without warning because they “used” you for their own finances? What will happen the next time that customer urgently needs your products? You will likely place this customer behind the other customer who pays well and treats you with respect. This is how you should also behave with your suppliers.
Speaking of paying on time, many of my clients are looking for discounts by paying early. Some suppliers like to offer early payment discounts, so if you have the cash, why not take advantage of it? In many cases, especially where standard 2% rebates are offered within ten days of payment, the money you can save is significantly more than leaving the same money in the bank. So if your cash flow can adapt, take advantage of these offers. Your salesperson will love you. And your accountant too.
To truly maximize your vendor relationships, plan ahead. My best clients who have been running their businesses for years all have this in common: they are always thinking ahead. They don’t like surprises. They do their best to find out what’s coming before it happens. Look at your historical buying habits. Analyze your orders and work in progress. Dig into your lead pipeline of pending projects. From there, talk to your suppliers and make longer-term commitments. They’ll love you for it because who wouldn’t love someone who promises something in the future (and of course keeps those promises)? In exchange for their love – and perhaps an initial deposit – ask for a better price. You will probably get it if your order is large enough.
All that love is great, but regardless of being loved, let’s also admit that relying on a single vendor isn’t exactly the best strategy. Things change and circumstances sometimes overwhelm people with the best intentions. As we know, sometimes people don’t do what they say they are going to do. And when that happens, you’re forced to tell a customer that their order is delayed because a supplier is delayed. You need to avoid these situations and the only way is to make sure you have alternates. I don’t care how much love your vendor relationships have, people fall in love all the time. So make sure you have backup providers in place. Spread a few purchases around to keep them happy. Include them in your communications and nurture your relationships so that if the going gets tough, you can switch to plan B if necessary.
Related: 5 Ways to Effectively Manage Supply Chain Disruptions
Finally, the best way to improve your relationship with suppliers is not only to buy more products from them, but also to help them grow their business. Refer them to clients when you can. Make introductions. Include them in your business network. They are your partners. The more you help them succeed, the more they can help your business.
No, you’re 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 simply by taking the steps I suggested above. Given the economic environment in which we find ourselves, this is not just a best practice. It is an essential practice.