“Before you send that email, there are a few lines I want to take out. We don’t want to share that information with that supplier.”
“Really? But this supplier has done so much for us – shouldn’t they know what’s going on?”
“Not yet. Maybe later – but we don’t want to put any tension on our relationship right now.”
Most companies have a list of key suppliers that you just couldn’t live without. Your dependence on them reminds you of the support you get from best friends, siblings, or even your spouse. But sharing personal information with family and close friends is often easier than sharing business information with your suppliers. What if they take advantage of you? What if they share that information with your competitors? What if they become your competitor?
Navigating your supplier relationships depends a great deal on your business model and the character of the suppliers you work with. Perhaps you could benefit from increased information sharing. Or – perhaps you should hold back a bit more. Here are three approaches to supplier relationships to consider.
The Johnny Tightlips
Johnny Tightlips is one of my favorite characters from the Simpsons. His catchphrase, “I ain’t sayin’ nothin’,” characterizes the attitude that a surprisingly large number of businesses take. While this arms-length relationship seems cold, it also has served many companies quite well.
The stories of suppliers moving upstream and becoming a direct competitor with their customers are numerous and instructive. For example, Asus was Dell’s supplier when they announced their own brand of personal computers that would compete directly with Dell.
If you’re a fan of poker-like negotiations, then keeping your cards close is highly advisable. Millions of dollars have been won by letting the other party speak while you sit quietly and listen. In fact, using a “pained pause” may be a great tactic to try next time you’re in negotiations. This tactic is described as, “When your negotiating partner makes a too-low offer, sigh, look him or her in the eye and say nothing.” Your silence puts pressure on them to do better, negotiate with themselves, and make a better offer without a word from you. For more on the Pained Pause, check out this Lifehacker Article.
However, relationships with Johnny Tightlips suppliers are only good as good as the benefits they bring. Unless you have most of the power in a supply chain, it’s unlikely that your suppliers will sacrifice much for you. When hard times come, they’ll more likely to switch to your competitors since there’s no loyalty or relationship in place.
Here’s a couple of my favorite Johnny Tightlips appearances:
The Open Book
On the opposite end of the spectrum is the open book approach. Your suppliers provide valuable services to your company – much like your employees. Treating them the same as employees, especially in regard to information, makes a lot of sense.
Being open has a myriad of benefits. Suppliers are able to collaborate with you on new ideas. Because they’re higher up the chain, they bring valuable insights about what efforts they’ve seen previously work or not. They also may have innovative ideas that they’re more likely to share with you because of your relationship with them.
An open policy also can be lifesaving when the road gets bumpy. Suppliers are much more patient when they know what is going on – why payment is delayed or orders are down. Though the rough spots are often the most difficult times for honest communication, that’s when it’s most impactful. A detailed email explaining the situation openly can open the door for more lenient payment terms and with the relationship intact.
Before your open your books completely, here are some important questions to ask:
- Has your supplier proved their trustworthiness yet?
- Is there any specific information that poses an unusually high risk if shared?
- Have sufficient contracts been signed to prevent unauthorized sharing outside the business?
- If you are a public company, are SEC guidelines – especially insider trading rules – being followed?
- Have we sufficiently explained the policy to those who interact with our supplier?
- Are your instincts prompting you to hold something back? Why?
Despite the risks, opening up communication often yields impactful results.
The Game of Kingdoms
A middle ground is a philosophy I call the game of kingdoms approach. Imagine your company as a kingdom – complete with a castle and city walls. Your suppliers and customers are also kingdoms. Some are bigger than you, and some smaller. Just as a king engages with other kingdoms, you work with other companies.
The much larger kingdoms – the ones you’d like to have on your side if a war starts – merit investment in open communication. You want to build those ties in diplomatic ways by sending emissaries and fortifying trade routes. The smaller kingdoms may require less work. Taking a diplomatic game approach and envisioning various castles often helps me make better decisions on supplier relations.
Besides, “inter-kingdom diplomacy” just sounds more fun than “supplier relationship management.”
What’s Your Weapon of Choice?
Which approach do you currently use with your suppliers? How might you benefit from adjusting your communication style?