Identifying the right entities to be a part of that sphere and using their expertise could mean big gains and long-term sustainability, In the construction industry, it’s best to start with your suppliers. No matter where you are on the construction industry value chain, the supplier relationship can have a direct impact on your success, whether you want it to or not. This holds true in any market condition — robust or weak. The key is to be proactive and select partner relationships that bring the most value. It’s all about how you can leverage the relationship for maximum joint benefit, rather than settling for a mere buy/sell arrangement.
In our industry, supplier selection is based a fair amount on price. Seems reasonable. When quality and delivery are equal, a builder, contractor and/or distributor selects suppliers and/or products because the price is right and will likely lead to a certain profit. However, settling for supplier relationships that only cover your basic needs is short-sighted and can stifle your business success.
Here’s why: A manufacturer’s DNA, like most of ours, is internally focused. After all, they say, “What gets measured, gets done.” And for most companies, the primary measure is profit. To accomplish this, most companies may dedicate up to 80 percent of their resources to running their internal machine. Those employees rarely, if ever, interact with a customer.
This sometimes holds true for those functions that have an outward facing role. For example, customer service — teams are typically measured on optimizing call time (how fast can the call be completed and the order entered) versus how to enhance the customer’s business success. Building and maintaining the internal machine is important. However, if the focus was redirected some to support the customer — even ever so slightly — a more sustainable growth opportunity for both entities may be achieved by merely following a different playbook.
So, when businesses look for a supplier partner, it’s best to evaluate those potential partners on how they define their success. Is it by maximizing their own profit each quarter, or through enabling their customers to be successful, which in turn leads to their own success? Manufacturing organizations have typically invested in numerous resources to run their business, including human resources, health and safety, logistics, marketing, sales and finance – the list goes on.
The cost associated with these resources is already baked into the company’s cost structure and the resulting price. The individuals supporting that company’s internal functions have deep expertise and spend all their time utilizing this knowledge internally. Supplier companies have a great opportunity… use these “paid for” resources in an external fashion. These companies are ones truly dedicated to enabling their customers’ success. They view these as value-added resources available to you that could help you run your organization more efficiently.
Within our industry, organizations don’t traditionally partner in this way — sharing resources and sharing success. This shared ownership begins to evolve when both parties disclose goals and work together to determine the best path to accomplish them. Customers within the channel should be willing to raise their hand and ask for input and help, while manufacturers ought to be willing to “open source” their expertise. What happens then is the sphere of influence expands for both organizations.
In an example gone wild, we were working with a major insulation manufacturer. The organization wanted to facilitate purchases and was focused on making their small insulation contractor customers’ business more successful. The company developed an in-depth approach that provided resources to help the contractor's customers enhance their logistics, warehousing layout and bidding process all the way to how to best financially run their business.
This manufacturer enabled hundreds of contractors to become very profitable and successful. In turn, these contractors bought more insulation products — mission accomplished. The part of that story that often goes unshared is that this segment became so profitable that major consolidation occurred and now those consolidated parties have extraordinary buying leverage over the manufacturers.
Partnerships work when customers proactively approach manufacturers with some areas they would like assistance with, while manufacturers proactively offer and work to share best practices with their customers in order to make their business healthier. The catalyst for this is that customers need to alter how they approach and work with their suppliers, and suppliers need to recognize they can differentiate themselves by offering expertise and perspective. By doing so, each will have a new level of understanding as to what they bring to the partnership and how they strengthen each other’s sphere of influence.