21 May 2008 | Paul Snell in Johannesburg, South Africa
The consequences of being a good customer to your suppliers are often underestimated, according to a consultant.
Will Parsons, director at Qualitar Consulting, told delegates at the Institute for Purchasing and Supply South Africa (IPSA) and CIPS pan-African conference yesterday: "If you want suppliers to do the right things for you, you have got to behave in the right way."
He said it was a fundamental truth that suppliers treat their customers differently. He used an example from a manufacturer of starter motors that he witnessed shortly after entering the profession.
He said when on a tour of a supplier's factory in the 1970s he came across two big bins marked "Reject A" and "Reject B". When he asked what the difference between the two was, he was told that those products in the "A" bin had failed final inspection and needed to be re-tooled. Those in the "B" bin were not so bad, so they would be given to Rover, because they knew other car firms would send them back.
"I bet every supplier in the world does this," said Parsons. "The sales director didn't know it was going on and the buyer at Rover didn't know. It was a shop-floor level decision."
He advised buyers to be more strategic in their relationships, not to focus on squeezing the supplier's profit, but on helping the firm lower operational costs to get a better deal.
He added being nice to suppliers also brings the benefit of innovation, using the example of the first ATM - a supplier innovation - given to the supplier's favourite customer at the time, Barclays bank.