Good Vendor Relations Keep the Wheels Turning

Discussion
Aug 08, 2006
George Anderson

By George Anderson


Toyota has recently moved up in position to become the second largest automaker in the United States. Much of that success, according to the company, comes down to the relationships it has developed with its vendors.


Seventy percent of Toyota’s car parts are made by outside vendors and the company prides itself on friendly and cooperative relations with suppliers.


Taiichi Ohno, the production chief at Toyota, told the Milwaukee Journal Sentinel, “Achievement of business performance by the parent company through bullying suppliers is totally alien to the spirit of the Toyota production system.”


Jeffrey Liker, author of The Toyota Way, said the automaker is very demanding of its suppliers, pushing them to continually seek improvements in manufacturing and to create supply chain efficiencies.


While it may be demanding, said Mr. Liker, it is also very supportive. He likened the relationship of Toyota and its vendors to that of an extended family.


The Journal Sentinel article says The Toyota Way stands in sharp contrast to the American Way. Most American companies it contends use “the big club to force price reductions, quality improvements or just-in-time deliveries. Threats of moving the business and intimidation are the major tools.” 


Discussion Question: How would you describe the current state of relations between retailers in the U.S. and the vendors (manufacturers, wholesalers,
sales agents) that supply them with goods and services?

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9 Comments on "Good Vendor Relations Keep the Wheels Turning"


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Ben Ball
Guest
14 years 6 months ago

The trick to measuring vendor/distributor relationships and performance in the CPG industry is to determine both the relative performance of the vendor/vendor group AND the relative importance of the measured attribute to the distributor/distributor group (class of trade normally). In a very recent Customer Equity Assessment (our name for it) we found that a) manufacturers have to really do something outstanding to significantly distinguish themselves — positively or negatively — versus the industry, and b) that as a group, manufacturers performance trails the importance retailers ascribe to any given attribute by over one full point (on a five point scale).

Translation: vendors in this department at least have a ways to go to satisfy their customers. (Leon and Ian’s comments regarding “collaboration versus capitulation being well-taken.)

Another interesting finding: it is quite easy for a vendor to slip in performance in a tangible area like customer service. Conversely, it was quite difficult for any one vendor to distinguish themselves on more strategic attributes like thought leadership and innovation.

Carol Spieckerman
Guest
14 years 6 months ago

Our assessment work within vendor companies confirms that many are still their own worst enemies. Has the business gotten tough? Sure. However, ask any buyer to name a gold standard vendor/supplier and they will have a ready answer. As for “the rest,” among them you will find the entitled, the untrained, the over-blown, the unskilled, the tedious, and the out-of-touch…and all of them wearing these “burdens” in full view for anyone who dares work with them. Replaceable? Yep (and they’ll call it a lack of loyalty on the part of the retailer).

Ian Percy
Guest
14 years 6 months ago

Leon’s nailed it — there seems to be confusion over collaboration vs. capitulation. The smartest thing anyone can do is help their vendors be as effective, efficient — and profitable — as possible. How can bankrupting or compromising your vendors because you’re big and tough be a good thing?

The secret is to have powerful unencumbered flow throughout your system, from vendors to operations to customers. Every link held to high standards of performance and every link being well rewarded for that performance. Make your vendors winners and they’ll do the same for you. Don’t be fooled, they’ve got more power than you think.

Dan Nelson
Guest
Dan Nelson
14 years 6 months ago

The level and depth of supplier/retailer collaboration and information sharing crosses a wide spectrum. Wal-Mart and it’s retail link platform provides suppliers wide access to a breadth of information to assist in inventory planning and materials procurement efficiencies through real time POS data. There are great examples of supplier/retailer strategic planning that has resulted in Win/Win/Win gains for suppliers, the retailer, and the shopper.

Unfortunately, the development curve is slow and there are more examples of transactional partnerships than strategic ones at this time. The people who are doing it best for mutual gain are the larger suppliers and retailers, and it is one reason why they continue to grow at the expense of the “push relationships” that are immediate and transactional. “Partnership” is an overused word in the CPG Industry, and collaboration can be easily misstated.

Defining mutual gain clearly is step one, followed by measurement to ensure both parties are confident that a Win/Win/Win is taking place.

Kenneth A. Grady
Guest
Kenneth A. Grady
14 years 6 months ago
Comparing Toyota’s relationship with its vendors to the relationship of any US retailer with its vendors is difficult. Toyota has spent more than 50 years working through the concept of making its suppliers (its suppliers’ suppliers and so on) an integral part of its business. The level of integration between and among these companies across not only the distribution dimension, but product development, quality, safety, operations, etc. is incredibly tight. Remembering that Toyota excels at just-in-time production, the demands on the suppliers are very high. Nothing gets everyone’s attention quite like the experience of a car production line shutting down because the right engine (and the only one that would fit in the next car on the line) wasn’t built and delivered on time and ready to install. The contrast to US retailing supply relationships is stark — and an opportunity. US retailers and CPG manufacturers could work wonders if they decided that cooperation was in their joint interests. Improved and customer specific products, reduced overruns, shorter lead times, and better quality are a very… Read more »
Leon Nicholas
Guest
Leon Nicholas
14 years 6 months ago

Regrettably, I’d say that the current state is characterized by fatigue on the part of manufacturers who, in the words of one, are “exhausted” by the logistical and merchandising mandates issued by the larger retail players who talk collaboration but expect capitulation.

Mark Lilien
Guest
14 years 6 months ago

Toyota owns significant proportions of certain suppliers, which might hint at why their suppliers say they have amiable relationships. GM lent tremendous management support, including on-site executives and engineers for many months, to a key troubled safety equipment supplier in the late 1990’s. Every auto assembly plant in Europe, North America, Japan and Korea uses just-in-time parts deliveries, so the mutual interdependence on reliable suppliers is critical. No one can ship cars with components missing, and no one keeps more than a few days parts supply.

Well-run retailers and suppliers know that supply chain collaboration helps all parties. Poorly-run retailers and suppliers attempt to shift their costs to the opposite partner. Toyota and GM both know they can’t make a profit without well-run suppliers who are also profitable. GM is bailing out Delphi and Ford is bailing out Visteon because there will be no GM or Ford without Delphi and Visteon. Retailers and suppliers who use fines and sloppy procedures instead of collaboration aren’t optimizing their profits.

Stephan Kouzomis
Guest
Stephan Kouzomis
14 years 6 months ago

If retailers would do more than share their vendor category
information, we could start a very preferred and needed
marketing, selling and merchandising relationship, customized to the retailer. Said another way, have a marketing member from each side on the team!

The issue remaining between retailer and vendor is trust – to include sharing of consumer data; demographics; and how the
vendor could assist in marketing the category and its Brands.

Just to have retailer/vendor teams that focus on distribution schedules, next allowance period, volume incentive and buying ads is needed. BUT it doesn’t speak to the consumer marketing needs for both sides.

Sure there are some great retailer/vendor teams. But after many years, it is sad the relationship hasn’t progressed to a preferred marketing team effort. The competitive landscape gets rougher, and this marketing team approach can, and will, bring benefits to both sides! Hmmmmmmmmm

Cory Van Buskirk
Guest
Cory Van Buskirk
14 years 6 months ago
Well, here’s a perspective from the supplier’s side coming from someone who’s worked for years with the best and the worst of retailers from a relationship point of view. First and foremost, there are plenty of suppliers in the US who will willingly and energetically develop a deep partnership with retailers who show a commitment to both parties winning together. Many retailers talk a good game until an investment in the future is required, and then it becomes the supplier’s requirement to give if they want to keep the business. An interesting correlation is that those retailers who really work to establish a long term relationship that is mutually beneficial with their suppliers are the ones who are building their brands, growing their businesses and improving their margins. Those who “beat em up, suck em dry and then move on” may win in the short term, but inevitably, they have some major disaster or an erosion in performance. Then they are left wondering why. As a supplier, let me tell you without a doubt, the… Read more »
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