Saturday, August 26, 2006

Customer/Supplier Partnerships - Part I - Customer-Supplier Process: Creating Value??

In Detroit (and perhaps elsewhere) a daily topic of debate is should you buy an American car or not. It is suffice to say if your a union member most will say buy American. I have heard both sides of the argument and I own three American Cars (Dodge, Ford, Mercury) and a Honda.

The arguments usually center around if you buy a Honda even though it is assembled in the United States the profits go back to Japan. If you buy American most of the parts are made in foreign countries but the profits stay in the United States.

I'm willing to bet that no car made in the United States is made from pure American parts. My questions are why do Union Members get so upset if I buy a Honda when the Big Three buy so many parts from a foreign country? Should NOT the Big Three (their employers) set an example for the American Consumer? Of course not, it is a global economy and may the best company win according to the consumer. For years the Big Three have brow beat their suppliers to do many things that they themselves would not do when it comes to Quality Improvement.

This brings me to my topic of Customer-Supplier Partnerships.

My goal is to post a number of write-ups on this important topic. The plan is to be generic as possible in my examples so that the information can be applied to any industry.

NOTE: I lean toward Single Source Suppliers that form "true" equal partnerships where
both sides disclose and share information in a meaningful manner.


Much has been written about customer/supplier partnerships and the importance this relationship plays in providing value to the customer. Let me relate an experience that made
me think about the importance of customer/supplier relations.

A few years back I was in Chicago on business. I usually rented a car, but this trip I chose to take a taxicab so that I could save time getting in and out of the airport. As I sat in the backseat of the cab I started to think about my upcoming meeting with Motorola and the importance of trust in a customer/supplier partnership. Trust is the relative confidence one has in the predictability that an individual or group will do what they have agreed to do. Once an individual or company has developed a degree of stability, reliability and trust with their customer,
it can be objectively measured and observed. Let me share the following observation:

Being a veteran of many a cab ride in Chicago I can state that the predictability of me reaching my destination on time has been very good. Whether or not I trust that I am being treated fairly is another question. After all, the first thing I usually notice when I sit in the back of the cab is the cleanliness and thickness of the Plexiglas shield that protects me from the driver, or what many might say is protecting the driver from me. I guess the shield is there because the driver (supplier) doesn’t trust me (customer).

As I sat rigid in the torn seat and try not to move and touch any unnecessary surface, I can’t help but read the notices attached to the glass that inform me what numbers to call if I feel I have been cheated, there is even a chart that explains the amount I should be charged from certain locations. These types of messages don’t provide a trust between customer and supplier.

Communication is a burden, not because of language, but because the Plexiglas shield makes it impossible to talk unless you yell. The last trust barrier to overcome is the fact that the driver only accepts cash; no way does he trust my corporate credit card. However, he does hand me a card and says “call me later“ and I’ll drive you back to the airport. Alas, a contract made in quality heaven.

How many of these type of customer/supplier relationships (internal & external) exist at your workplace? Do you set up shields between your customers/suppliers, and yourselves or do you set up a value chain that works together to serve the ultimate rate-paying customer.

I have found the most successful customer/supplier partnerships to be are those where the supplier adopts the customer’s customer as their own.

An example of this type of behavior is one I recently witnessed at the opening of a new Bar. Budweiser employees were working directly with the Bar’s staff to help cook and sell hotdogs for 25 cents and beer for 75 cents a cup. Additionally, they were passing out coupons to be used at a later date that offered more discounts on beer. In this instance, Budweiser, a normal supplier to the Bar, was adding value to both their customer, the bar, and to the ultimate rate paying customer, the consumer. The Bar’s customer received added value both through the discounts and coupons they received on the beer and the increased level of service because the Bar’s staff could not handle the large amount of patrons that attended the opening. Budweiser added value to the bar by helping attract attention to the Bar’s grand opening and reducing costs to the bar owner by giving free help to cook and serve. Budweiser in this case, created a win-win situation for all involved, especially themselves if they get increased sales.

In order to manage a good customer/supplier partnership a methodology should be established that answers the following questions:

1) Has a relationship been established with your suppliers to reduce unnecessary costs and controls that may waste their capital without negatively impacting the
quality of products/services?

2) Does the current process allow suppliers to deliver their inputs into
your processes without defects and delays?

3) How often are suppliers provided with constructive measures and positive feedback on their performance?

4) Does the feedback provided inform suppliers both the positive and negative impact of their product/service has on our customers?

5) Are there regularly scheduled meetings with the supplier to work on quality related issues that result in continuous process improvement opportunities?

6) Have there been joint venture teams with the supplier to consider redesigning their processes and ours to optimize the customer experience?

7) Does the supplier receive timely praise and kudos for a job well done?

8) Is the supplier included in any awards that are result of their process improvements they have made that has a direct impact on our customers?

If the answer to any of these questions was, “No,” then sub optimization is taking place in the customer/supplier relationship that probably is resulting in a negative experience for the customer.

Part II - Supplier Performance Evaluation Program

Part III - Focusing on the Customer - Which One?

Part IV - SIPOC Model & Internal Process Model


Anonymous said...

Well Stated. I look forward to your additional posts on this subject.

Best Regards,


Anonymous said...

ECR Man, don't get me statrted on this topic.

We're looking at the Toyota Mini van - here's what I saw:

A vehicle made in the USA put together by American workers
Assembled in a plant, built by American workers.
Using US parts (built by American workers)(85% US content).
Serviced by American Workers.
And - Corporate Execs that get paid a lot less then US counter parts.

Then I looked at the Chevy HHR, and what did I see:
A vehicle made in Mexico.
Assembled in a plant built by Mexican workers.
Using 60% Mexican parts.
With profits being funneled back to Highest paid excutives on the planet.

Toyota uses US suppliers and GM can't. I think I'll buy a vehicle built and serviced by a lot of Americans.

Hey, I have an idea, lets base more companies in the US and offshore the executive ranks - talk about cost savings.