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Encourage Suppliers To Share What They Know With You

Mar 24, 2008
What kinds of relationships do you try to create with your suppliers?

Suppliers are an often-ignored source of information about irresistible forces. Your firm's suppliers know a lot about what you're doing wrong, but they seldom tell you.

Why? Because no one in your organization usually wants to listen.

Supplies are often bought against detailed specifications through your company's purchasing agents. Such purchasing agents usually don't have the knowledge or the authority to change the specifications to something more appropriate. Their job is to get the specified product, at the right time, and at the lowest price from reliable suppliers.

Those who designed the product that requires the supplier's component are normally as happy as the proverbial clam, feeling safe in the belief that the product's design couldn't possibly be any better. From the designer's point of view, for a supplier to suggest a change is to criticize perfection. Some designers take this a step further and view any suggestions from suppliers as being a personal insult to themselves and their own design capability.

Why do suppliers often have a superior view of what you need? For one thing, they may be supplying several companies in the industry, and know that the component purchased by your competition works a lot better and is cheaper for the competitor to buy and use.

Whatever else is going on, the suppliers usually know more about the alternatives than you do. For another, suppliers know a lot about the trade-offs in cost and performance that go into one specification versus another. The supplier can make that trade-off better than you can in many cases.

In addition, your purchasing agent wants the lowest possible component price. The supplier may sometimes be able to give you a more expensive component that greatly lowers the cost of the entire product that you are producing. This happy improvement occurs because the more expensive substitute will work better and allow you to use less expensive components for other parts of your product.

You can turn the situation around and encourage information sharing with your suppliers by offering incentives, often called "gain sharing." Let suppliers know that if they'll share improvement ideas with you, you'll reward them with a share of the benefit you receive as well as make their position as your supplier more secure. You'll probably also have to encourage your own people to listen, by giving them some access to the gain-sharing benefits.
About the Author
Donald Mitchell is an author of seven books including Adventures of an Optimist, The 2,000 Percent Squared Solution, The 2,000 Percent Solution, The 2,000 Percent Solution Workbook, The Irresistible Growth Enterprise, and The Ultimate Competitive Advantage. Read about creating breakthroughs through 2,000 percent solutions and receive tips by e-mail by registering for free at

http://www.2000percentsolution.com .
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