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The $100 bargain

Advice from a seasoned purchasing specialist on how to treat customers

by Malcolm Mills

Standing on the beach where he and his family were vacationing, a man saw his wife drowning. Unable to swim, he called out to a man in a nearby fishing boat. “Hey Mister,” he shouted, pointing desperately to the flailing woman in the water. “I can’t swim. I’ll give you $100 if you save my wife and bring her ashore!” A few minutes later the boat was on the beach along with the nearly drowned woman, and the fisherman demanded his money. Shaken and pale, the non-swimmer shrugged and looked at the fisherman. “Look buddy, when I saw her going down for the third time I thought for sure it was my wife.” His eyes cast down toward the semi-conscious woman at his feet. “This is my mother-in-law.” “Sorry,” said the fisherman. “Should I take her back?”

After going down a few times and after months of some highly intimate and yes, for some, painful resuscitations, the latest blip on the economic recovery scale indicates that our beloved economy may soon be able to breathe on her own again. She has coughed a tiny weak indicator, but a sign of life nonetheless.

On that note, what can we expect besides vomiting, spasms and coughing up financial algae and plankton?

You know what we’re going to see. We’re going to see a whole lot more of the less we’re getting used to but in far greater amounts! Get the picture? It’s the way it works with these things. Things get worse before they get better. And very unfortunately for some, recovery won’t be one of their options (not even for $100).

I’ll give you an example. According to a recent purchasing survey, the supplier “on-time delivery index” from March through June slipped to below 50%. In other words, suppliers were late on roughly half of all placed orders even though, in the same time period, market performance increased significantly. Surprised?

I’m not. Late deliveries are a tradition with many suppliers.

Okay, don’t get your knickers in a knot, reader. If any of you have an Achilles heel, it’s probably “on-time delivery.” But I’ll substantiate two exceptions of merit just to make a point, although there are probably more. McMaster-Carr and Acklands-Grainger deliver on time about 90% of the time, in my experience. And no, I’m not related to nor do business with either of them; I just know them as reliable sources due to past satisfactory business experience. They’ll survive because they’ve already proven their value to hundreds of thousands.

So the question is, “Have you heard anyone boasting about your business in this way lately?” If not, why not?

Let’s imagine that it’s you lying on the beach belching. As a customer, would I pay $100 to save you? Why would I take my foot off your head? Why wouldn’t I just shoot you now and save you from drowning and me a whole lot of aggravation?

Your deliveries are poor and you screw up my manufacturing production line and production schedules because of your poor performance. Your prices are barely comparable to your competition and my confidence level in you based upon your performance to date is, let me see, hmmm, oh yes, about 50%.

How are you feeling right now? Are you deflated, angry? Ticked off? Offended? You shouldn’t be. If you want to blame anything, blame the root of the environment which caused this mess. Yes, you are a victim (we all are), but how you accept your challenges and how you choose to recover is what will define your success in days ahead.

There already have been, and will continue to be, many casualties forthcoming. Inactivity could make you one of them.

On a positive note as a customer, I can tell you what customers (buyers) are experiencing right now and you can react in any way you wish with the information.

1. Manufacturing inventories are being kept low, as you know.
2. Timely supplier delivery is an increasing problem both nationally and internationally.
3. Due to recent layoffs of competent and experienced workers, accuracy in filling orders is also in steep decline.
4. Lead times have increased dramatically at raw materials supply levels and at mill levels. It follows through with distribution.
5. Many producers are not maintaining adequate levels of inventory especially on products imported into North America.
6. Customer confidence is down.
7. Customer/supplier communication is confused.
8. Buyers are eagerly seeking alternate suppliers and markets.
9. Customers are reducing supplier bases.
10. Customers are measuring “value” via supplier performance evaluations and achieving profit and loss statistics from that evaluation.

It seems that this recession has inspired the body(s) of professional purchasing organizations to sit up higher and take serious notice of a facet of purchasing cost controls long neglected. See? Recessions are good for something. What they are examining is called “Supplier Performance” reporting. No, it’s not new, it’s been included and taught; it’s in many procurement software packages but largely been ignored by accountant and procurement types in profit and loss reporting. It has always been considered far too time consuming and unworthy of measurement. Until now. Suddenly it’s worth the time. Supplier

Performance reports are being acknowledged and evaluated by many customers, becoming pertinent cost saving barometers. The data is being used to more accurately detail previously unrecorded losses surrounding performance issues.

Where does this leave your organization?
What can you do about it? Get ahead of them.

1) Think the way a customer thinks. Risk analysis isn’t just something astronauts do. Competent customers evaluate their suppliers using Risk Analysis tools and formulas. Things like: raw materials availability, rising fuel and other costs, natural disasters, labor issues, partner insolvencies, bankruptcies, service interruptions and general risks affecting delivery, these are all factors governing how you may be assessed when a customer performs a supplier Risk Analysis study on your organization.

Maybe you need to talk to your customer. You sure as heck need to talk to your staff. You will see much more usage of supplier/purchasing performance tools in days to come.

2) Implement a contingency plan. Ask what you would do if . . . There was a time when you could get away with not worrying if a shipment was delayed. Now is not that time. Have a Plan B and Plan C.

3) Evaluate your customers. Not all customers are equal. None are. Know each customer as an individual. Each customer has unique and specific needs which you must know in detail like the back of your hand. Until you know them inside-out you cannot be successful or hope to keep long-term customers. Buyers recognize ambivalence and indifference.

4) Place more effort into negotiating prices specific to each customer. Don’t just tell your customer how good your prices are, show them line by line. Put your money where your mouth is. Take an existing customer, evaluate your prices and how many and how much savings they can achieve over a year by purchasing from you (factor in your “on-time delivery” record, show you are aware of your shortfalls).

5) OEM arrogance. During recessions and times of extreme need, sacrificing OEM products for generic ones becomes a reasonable and sometimes totally logical option. Think about it next time you think you’re an indispensable source and your attitude reflects it.

Summary
So here is the long and the short of it. I’ll reverse the analogy. As the ugly woman on the beach at your feet slowly recovers, you have two choices. You can offer the man another $100 to drag her back out and drop her off again along with the anchor, hoping he has enough business sense to appreciate the top dollar offer. Or, you can gently try and push the water out of her belly with your foot, maybe roll her on her side and get her breathing again and endear yourself even more to your lovely wife, who can make your life wonderful or otherwise.

My guess is that you don’t have surplus customers either to drown or to let drown, so my recommendation is to push the water out and get the blood flowing once again. Whether you choose the mouth-to-mouth method is entirely up to you of course. Just remember that this is your mother-in-law and when she recovers no matter what you’ve done, you won’t have done it entirely right. Just hope she doesn’t recognize the toe print on the front of her blouse as matching your size 9 sandal.

Customers traditionally complain and demand more than you can reasonably give, but the upside is that they keep you around if you persevere professionally and you will likely prosper.

As for the fringe benefits, well, that’s between you and the missus.

Malcolm Mills is a 25-year veteran of purchasing and procurement and author of “It’s a Tough World Out There – 25 Ways to Lose a Customer 25 Ways to Fix It.” Order copies at toughworld@telus.net, Box 906, Merritt, British Columbia, Canada, V1K 1B8. Order directly by clicking here. Malcolm is available to speak at conventions and other events working in conjunction with Frank Hurtte of River Heights Consulting, Davenport, Iowa.

This article originally appeared in the Nov./Dec. 2009 edition of Industrial Supply magazine. Copyright 2009, Direct Business Media, LLC.

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