About a month ago, John Trentacosta wrote about a subject that no one wants to talk about (mhmonline.com). Fact is, an otherwise phenomenal supply chain can be brought to its knees when one partner in the chain runs into financial trouble. A business relationship with a pauper is not sustainable.
Some early warning signals - the canaries in the coal mine - include: requests for price increases, early payments, accelerated terms, or even financing support; late deliveries or quality degradation; failures to appropriately invest in IT and/or other assets; maintaining spend during downturns; delinquent taxes, deteriorating receivables, and extended payables; and bad press, among others.
Due duiligence on the front end can help prevent problems on the back end, but sometimes bad things happen to good people. That's when an early response team reaction to early warnings can pay off. Sometimes, you've got to pull the plug. But, often you can mutually develop work-out plans to let the troubled partner survive long enough to prosper -and to keep your supply chain humming in an unrelentingly competitive marketplace.
Costco continues to amuse and amaze by offering more than the usual products to pile in the cart. The Costco Connection magazine for June (www.costco.com, "connection") has a page devoted to "Fresh Views," with mini-features on: Wally "Famous" Amos (who has moved on to found Wally's Muffin Company),brainstorming techniques, and a quick summary of a 2009 book, Extraordinary Groups: How Ordinary Teams Achieve Amazing Results.
My big takeaways this month, aside from a hankering for a muffin or a chocolate chip cookie, were from Extraordinary Groups. One - not quite an aha! moment - was that a group dynamic can hinder, rather than stimulate, group productivity. The other was that "exceptional experiences can be thoughtfully nurtured and intentionally encouraged."
Good stuff, but the authors may have missed the larger point, which is that transporting tools and techniques for elevating group performance, to the operation of business relationships involving entire companies, can magnify and multiply the consequences of what might be accomplished.
Maybe an even greater message, though, lies in how Costco works at a fuller customer relationship by providing unexpected value, beyond the nuts and bolts of selling them tires and tube steaks.
Kathy: How do you think that your skills and ability in handling business relationships have evolved over your career?
Todd: I think that from where I started to where I am now I have a better appreciation and understanding of my customers’ business. And I think that by that evolution I’m able to talk more of their talk, obviously bring more value because I do understand their business. And by virtue of bringing that value, I believe that creates a better relationship. There is trust, there’s experience, there’s information flow, all those things.
In turn, again, I think that understanding your customers’ business builds a whole foundation for a relationship and things go along with that.
Kathy: So is it just your maturity or your experience of understanding the business?
Todd: Understanding through time, their business, and all the intricacies of their business and what they believe is value, what their issues are as they go about their day-to-day. Of course understanding what we do for them and put it together. These processes build relationships that are pretty much invaluable as you get to the end of the day.
I really believe when it comes to selling and the art of building relationships some of this is just inherent. I think you either have it or you don’t. I don’t think there is an in between.
So yes, you can get a better foundation, a better baseline, but when it comes down to it, to answer your question—I had somebody to show me the door, but when the door was open I inherently knew the things necessary to take those relationships and build on them.
Kathy: Do you look for that in hiring?
Todd: We sure try.
Kathy: It’s easier to teach them product than it is to teach them inherent skills.
Todd: It really is. And unfortunately we’ve hired people and we’ve had to let people go, not because they are not good people, but because when what we are trying to do in the market somebody can be very technically based and understand products.
But when the day is done if they can’t make a connection with somebody and build on that, then it’s not going to work. So unfortunately we’ve hired and let people go simply because they got to a certain point where they had all the technical skills in the world but that inherent piece, relating to a customer, couldn’t be met.
Kathy: Do you think it can be taught?
Todd: I don’t think it can, I really don’t. Some people are better than others in terms of how well they are able to get in there and connect.
One of the conversations I had, Kathy, you know this, is we had a regional meeting a few months ago. We were talking about our staffing and the people. We really tried to assess our competitors. We know what we are about. We know the things we are doing. But we really tried to put our shoe on the other foot of our competitors and figure out what they do better.
One of the things that came up from one of our formidable competitors is that they are just “guys guys,” as we put it. They put a team together that people want to be around. This is the stuff we are talking about—the inherent ability that they hire the people who have the innate ability to get in and make things happen, to build relationships.
We have better technical people, I’m convinced. But at the end of the day a lot of our customers want to be around people they want to be around. I don’t think you can teach that, I think you know it.
Kathy: All the inside sales people that I’ve listened to, the relationships that they have with their customers, is amazing. How do you measure it? How do you know if they are developing good business relationships?
Todd: How I gauge it today is far different than how I used to gauge it. Today, as I look at it is, are we able to use this relationship to make money? Because their—our customers’—job, and I don’t begrudge anybody, everybody is doing the job. But their job is to buy the best they possibly can. Our job is to sell the highest price we possibly can.
Relationships give you the opportunity to negotiate or give you an opportunity to do the work. I’m gauging the relationship today as, ‘Can you do all that and at the end of the day you are making money?’
We want better relationships. We don’t have a training program for that because, again, it is right back to what I said. We know inherently people either have it or don’t. We put them in the position. We want them to get to know people. We want them to do the things that they are doing.
But our managers now are really trying to use relationships. At the end of the day, are we able to use those relationships to make money?
It is not any more or any less just trying to be equitable with our customers. We are just trying to find that equitable approach where we are both winning in that situation.
Kathy: What advice would you give people, be it in sales or finance or operations, who really want to develop their business relationship skills?
Todd: Unfortunately you tend to live in the snapshot of where you are today. Things are changing so fast that you can’t assume anything anymore.
You can’t assume you have the relationship. You can’t assume you have the share. You can’t assume that you are doing great on service.
Make sure you understand what is in front of you because in some cases we are assuming a lot of things out there that just aren’t the case. Again, the economy has forced people to really do things they wouldn’t even consider doing a year or two years ago. That’s the assumption piece I was talking about. We just can’t assume much.
But I still believe on the relationship side of things, that at the end of the day it’s still what is keeping us in the game.
Price is big, but that same survey I mentioned, price was 3rd out of whatever category. It was still about trust and still about the product, the value and then of course price was there. It’s not the end all be all. But I think relationships are still giving us that opportunity to succeed to the best of our ability in the market today.
CNN Money has a great question and answer piece from the manager of a team of customer service representatives.
She wrote in by saying that 99% of the time, she is able to resolve customers’ problems amicably, but every now and again, she has to field a call from an irate customer. Her usual response is to have the manager one level above her take the hostile call.
She says that manager, in response, blames her and her team of customer service representatives, and as a result, this deflates her team’s morale.
The question posed in this article is: How do you handle difficult customers? Who comes first at your company, customers or employees?
Several people weighed in on this conundrum, and the adage the customer is always right pops up more than once in the article.
I can understand the significance of the customer being right. A company’s success—certainly the financial success, but success overall-- depends heavily on the relationship with the customer.
The morale of the employee team is also very important and imperative to a company’s success. If a company cannot retain its employees and has a high turnover rate, it sends a message that the company is not a friendly environment in which to work. Who wants to support a company that does not respect its employees?
In the end, I think it is important to find the balance. Yes, a customer is paying for your product or services, so their needs and expectations must be met. That transaction is very clear.
But I also think it is paramount to treat employees with respect and to show appreciation, because those people are representing the company. Their interactions with customers are a direct reflection of the brand. Therefore, their satisfaction is necessary to maintain the brand’s reputation.
So, what do you all think? In a situation like this, who would you put first—customer or employee?
Dominos has been in the news a lot recently because they have been attempting to change their taste. Dominos has always been known for their speedy delivery but has been near last for taste and quality. Dominos has taken lessons from coke and put them into making their new pizza. Dominos has gone through many consumer taste-testing sessions. With this new consumer information Dominos set out to make the perfect tasting pizza to go with their speedy delivery. From the advertising on the television and the web video connected to this article seems to show Dominos has succeeded in making a delicious tasting pizza. Dominos has taken lessons from coke, consumer ideas and preference, and formatted a pizza that will hopefully send them to the top of the pizza chart.
The experience Domino's has gained from making a new pizza is priceless. With the actions and thoughts Dominos has put into creating this new pizza could also be applied to any relationships they have. Like the pizza they stopped and asked what consumers what they weren't happy with and how would they like to see it change. They also had consumers taste test the product at every step along the way so that they knew the pizza would be perfect. Finally they had the perfect solution to their pizza problem. DOminos and other businesses could apply this to their relations. They need to stop and ask what their business partners want to see done and how they would fix it. Then apply changes and show the changes at various steps in the process. Then finally end up with a healthy and happy relationship. Many Companies start with their partners and shift down to the consumers, but in Domino's case they started with their customers and could apply this to every relationship they have.
http://www.cbsnews.com/stories/2009/12/17/business/main5989576.shtml
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http://www.feedstuffs.com/ME2/dirmod.asp?sid=F4D1A9DFCD974EAD8CD5205E15C1CB42&nm=Breaking+News&type=news&mod=News&mid=A3D60400B4204079A76C4B1B129CB433&tier=3&nid=820CC37E7FA94C2387B4E483F38D04F7
This article focuses on the business relationship between a large supplier, Monsanto, and the every-day American farmer. Farmers can create margin on their product by using new innovations, such as the biotech seeds Monsanto produces, which increase the quality and yield of a product. Monsanto understands that their competitors cannot duplicate the value of their innovations, so as a differentiated supplier they raise the price of their seed. The seed provided by Monsanto can exponentially increase the growth of a farmer. However, because Monsanto is the only supplier with this quality seed, they increased price hinders the farmer’s growth. Recently, competitors of Monsanto have been decreasing their seed prices in order to gain customers by taking advantage of the large price gap between their seed and Monsanto’s.
This is relevant to the topic of business relationships because Monsanto has noticed their customer base decreasing, assed the situation, and have put time and effort into solving the business-to-business problem. Monsanto has understood that the needs of their customers are not congruent with their expectations. In order to clarify the farmer’s situation and goals for the future, Monsanto took twelve months to personally visit with over 1,200 customers. At these visits, Monsanto discovered how the farmers view their product and company. The supplier concluded that they have an “unmatched toolkit” compared to their competitors.
After thinking about Monsanto’s, the competitor’s, and farmer’s situation, I asked my self a few questions. Can the competitor’s create a bundle so that price sensitivity is not the only reason why customers choose their product? Will farmers have no choice but to purchase Monsanto’s seed because of the quality? As a supplier with an “unmatchable toolkit”, will Monsanto continue to make an effort to personally visit with their customers?
http://cornandsoybeandigest.com/marketing/0301-chambers-farms-grew-markets/index.html
Iowa soybean farmer, Norm Chambers, has been busy expanding his target market to overseas purchasers during the last two decades. Utilizing his past networking to obtain current customers as well as gaining thorough knowledge of the Japanese culture of business, Chambers has been able to attain a buyer-seller relationship that greatly benefits both businesses. Moving out of the spot market through growing a value-added crop has allowed Chambers to capitalize on premiums that are apparent as a producer moves toward food and the consumer end of the continuum. There were multiple risks with partnering with an international contact, and the suppliers are currently feeling one such pressure as competition continuously increases in their industry. Theodore Levitt states, “The relationship between a seller and buyer seldom ends when a sale is made. The sale, then, merely consummates the courtship, at which point the marriage begins.” Chambers has been loyal, fair, flexible, considerate and compliant throughout the course of his “marriage” with his Japanese partner, which has resulted in a healthy, long-term relationship between buyer and seller.
Recent changes in food consumption habits of people in developed countries have included a growing demand for a greater variety of value-added products, which, in turn, has given rise to greater sophistication in food processing and distribution systems. One of the main principle mechanisms that agribusiness uses to secure supplies is contractual relations. This includes sharecropping, purchase-sale agreements and contract farming.
Procurement methods depend on product type, seasonality, demand, type of grower with whom firms establish relationships, positive or negative experiences from earlier relationships and specific policies point out that land tenure and political conditions of a country also influence decisions. These factors affect the relationship between firms and their labor force. There needs to be flexibility which allows regulating the labor supply in line with production cycles and minimization of costs such as health insurance and paid leave. Firms protect themselves from politically organized labor to ensure a stable workforce. They do this by practicing sharecropping or contract farming.
http://www.accessmylibrary.com/article-1G1-134777787/agribusiness-and-farmers-mexico.html
In India, Wal-Mart Goes to the Farm
Despite the fact that government and its policy do not allow Wal-Mart Stores to sell directly to consumers. In the past two years, Wal-Mart establishes a good relationship with farmers in India, trying to open this market where modern stores make up just 5 percent of the country’s retail industry. Wal-Mart operates in India through a 50-50 joint venture with Bharti Enterprises. Their partnership, known as Bharti Wal-Mart, supplies retail stores that are fully owned by Bharti and runs a wholesale store that sells to shopkeepers, hotels and other businesses.
Wal-Mart has succeeded their relationship with the framer. Many farmers in India say they like working with the company. It typically pays them 5 to 7 percent more than they earn from local wholesale markets and they don’t have to worry about the transportation. Other farmer state that his yields have risen about 25 percent since he started following farming advice from the company and its partner, Bayer CropScience. And other said they trust Wal-Mart because Wal-Mart has been paying on time. We would just like them to buy more
Wal-Mart relationship with the farmer and supplier had set up its supply system in the India. It is the relationship that Wal-Mart trying to built with farmers and suppliers give them good supply and distribution center. Farmers are more willing to provide their product to Wal-Mart, because it is Wal-Mart that helps them to increase their margin.
http://www.nytimes.com/2010/04/13/business/global/13walmart.html?pagewanted=1&sq&st=nyt&scp=2
Kellogg’s prides itself on quality cereal and other food products. The quality exemplified by Kellogg’s is due to the ability to specialize its team in producing food products, not logistical tasks. For this reason, Kellogg’s recruits other businesses to handle these responsibilities; activity essential to supply chain management and a successful product or service. Stock, transportation and marketing of Kellogg’s products allows the different links of their supply chain to act cohesively. Kellogg’s employs TDG, a storage company, to handle stocking and pallet responsibilities of their product. Kellogg’s also holds a relationship with Kimberly Clark, an industrial supply manufacturer, with whom Kellogg’s shares transportation methods. Lastly, Kellogg’s relationship with Tesco, a food retailer, exemplifies Kellogg’s specialty marketing through creation of an advertising unit for use in retail stores. By Kellogg’s dividing product responsibility, it allows the company to save time and money while increasing competitiveness in product and maintaining brand integrity. Kellogg’s reduced costs by: not having to employ more workers to complete said tasks, decreasing the number of empty transportation vehicles and not having to expand production space for storage purposes. Without Kellogg’s business relationships, they may not be able to hold high standards to their products because they would need to concentrate on other aspects of business than food product creation alone. The information provided can be found on the Times 100 website.
Kellogg’s prides itself on quality cereal and other food products. The quality exemplified by Kellogg’s is due to the ability to specialize its team in producing food products, not logistical tasks. For this reason, Kellogg’s recruits other businesses to handle these responsibilities; activity essential to supply chain management and a successful product or service.
Stock, transportation and marketing of Kellogg’s products allows the different links of their supply chain to act cohesively. Kellogg’s employs TDG, a storage company, to handle stocking and pallet responsibilities of their product. Kellogg’s also holds a relationship with Kimberly Clark, an industrial supply manufacturer, with whom Kellogg’s shares transportation methods. Lastly, Kellogg’s relationship with Tesco, a food retailer, exemplifies Kellogg’s specialty marketing through creation of an advertising unit for use in retail stores.
By Kellogg’s dividing product responsibility, it allows the company to save time and money while increasing competitiveness in product and maintaining brand integrity. Kellogg’s reduced costs by: not having to employ more workers to complete said tasks, decreasing the number of empty transportation vehicles and not having to expand production space for storage purposes. Without Kellogg’s business relationships, they may not be able to hold high standards to their products because they would need to concentrate on other aspects of business than food product creation alone.
The information provided can be found on the Times 100 website.
The board of directors of McDonald’s has recommended that the company’s shareholders vote against a proposal to require that 5 percent of the eggs purchased for the chain’s restaurants in the United States be the cage-free variety. McDonald assert there is no scientific reason to change 'Battery cages' to 'cage-free eggs' and no evidence to support the 'cage-free eggs' is better. However, many restaurant chains have changed their eggs to ‘cage-free eggs’ and The European Union (EU) already passed a law that bans conventional battery cages starting in 2012.
Although there is no scientific evidence, most customers recognize 'cage-free eggs' is better than'Battery cages' and want it. In addition, it is too cruel to raise hens in 'battery cages' that afford a minimum of 72 square inches of floor space per hen just for human. Even the hens cannot fully spread their wings in the cage.
I also understand McDonald’s side because cheap price is one of biggest reason why people choose McDonald’s, and 'cage-free eggs' is more expensive than battery cages.
However McDonald’s is very huge restaurant chain and have huge demand of eggs. Therefore, if McDonald’s makes new relationship with big farms which use the ‘cage-free eggs’, the farms would supply the huge demand to McDonald’s as cheaper price. Besides, I suggest McDonald’s serve two kinds menu for customers’ choice, cheaper one is by battery cages egg and a little expensive one is by cage-free eggs.
Wal-Mart has been one of the most successful international businesses in the world. In the process of expanding to India, it is important for Wal-Mart to develop a good relationship with farmers, as farmers are a vital aspect to India’s food industry. Wal-Mart is trying to create a secure initial agricultural position that can be used for further improvement in India. In order to improve efficiency and increase the flow of goods, the company uses hyper efficient practices in their distribution model. For the past few years, Wal-Mart has been developing a close and trustworthy relationship with the farmers in India. In Haider Nagar, farmers prefer to do business with Wal-Mart because the farmers get paid well and on time. Wal-Mart distributes its products quickly to consumers, which increases farmers’ profit since they sell their product at a faster rate. Overall, the business to business relationship a company has with its partners is important because it will help the company succeed in foreign markets.
Wal-Mart entered India with the idea of global expansion, but it has been faced with opposition that it usually does not face. What did Wal-Mart do? It adapted to the market conditions and made it work. Instead of focusing its attention down the chain on customers, which Wal-Mart cannot do because of restrictions, it is focusing its attention upstream on the producers – the farmers. This relationship is mutually beneficial because it gives Wal-Mart a valuable partnership within the country, which is important when entering new markets, and the farmers receive higher prices for their products as well as information and technology that are available through Wal-Mart and its affiliates. Perhaps the higher productivity and incomes will alleviate some of the poverty problems and Wal-Mart will succeed in India. This example is a good indication that adaptation and cooperation are the keys to successful entrance into a new market.
http://www.ndtv.com/news/india/how-wal-marts-wooing-indian-farmers-19777.php
Its so secret that in the past year, McDonalds has beefed up their menu. Certified Angus Beer burgers have invaded the iconic McDonalds menu, and customers seem to love them. The third-pound lineup includes: the deluxe, mushroom & swiss, and the savory bacon and cheese. The burgers are made with USDA-inspected Angus beef and are intended to be more "gourmet" than the average McDonald’s offering. For instance they come on "bakery-style" rolls in order to appeal to those who would normally opt for a different burger chain over the golden arches.
With $3.99 a pop, McDonald’s is able to sustain a more competitive advantage against restaurants with a higher quality alternative to fast food. Not only does this relationship work for McDonald’s, the Angus Beef brand is further instating themselves as the affinity in beef. Boasting that less than 8% of all beef makes the cut, Angus Beef is continuing to find their product in American’s hands, or for that matter American’s stomachs with this business-to business relationship with McDonald’s.
http://www1.mcdonalds.com/angus/
Empire Valley Ranch is a family farm in British Columbia, Canada who was using the conventional channels to market their cattle. They would sell their weaned calves on the spot market to area buyers most likely for an established per pound live weight. Essentially they were selling a commoditized product to a faceless buyer. However, they have decided to differentiate their product by taking a risk and switching to a system where they finish their calves on a grass-fed diet and production is free of hormones and antibiotics. This allows them to enter a niche market with fewer buyers and for the time being higher prices and greater margins. They have had to establish direct relationships with their customer base in order to assure their product can be moved. “One must be able to build a real relationship with your customer. Once you build that trust then you most likely will have a customer for life/There is nothing better than a person coming in or calling to say they love your beef.” –Joyce. The risk seems to be working out for them and their new customers.
http://www.bclocalnews.com/bc_cariboo/williamslaketribune/community/89484742.html
I found a brief article describing business to business relationships in the agriculture/food industry. Effective communication through businesses can help reduce environmental uncertainty, improve access to crucial resources, and increase business productivity and effectiveness. Agribusiness relationships are disected into four different types: Spot markets, Repeated market transactions, Formal contracts, and Financial participation. Then, the elements of a good agri-food supply chain relationship are discussed. All information is detailed with two specific examples. The first business to business relationship example deals with the cattle-to-beef process, while the second example details the barley-to-beer/whiskey process. Both examples are perfect for describing great relationships where extreme trust is necessary, especially with quality and safety. Finally, research identifies several success factors for sustainable supply chain relationships and communication. Visit the website at
http://www.sac.ac.uk/mainrep/pdfs/relationshipsinagrifood.pdf
Jason Koss
April 14, 2010
ACE 430
http://stateofthebrand.com/?p=94
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This is a nice article about how Cargill starts with problems faced by customers, in this case the high salt content of Campbell’s Soup, and finds a solution. Salt is slowly taking center stage for significant regulation by the FDA. The medical and nutrition communities are fairly united in their concern about the overly high levels of sodium and potassium in processed foods. At issue for the food manufacturer are changes in recipes, effects on brands and consumer loyalty, increases in costs of materials, and reduction in shelf life. At one level the "SaltWise" story is a classic business relationship story of a supplier solving a strategic problem for a buyer. At an equally powerful level this is a great story about a firm with a long history in commodities who turns a low valued undifferentiated good into a high value/high margin industrial ingredient.
For the students of ACE 430. We talked about the seminal article by Dr. Theodore Levitt where he introduces the concept of “table stakes.” It is the industrial marketer’s task to bundle information, service, and innovation around the product to create value for the customer. The “Saltwise” story is a wonderful example of Cargill investing in R&D and supply chain relationships with food manufacturers (Campbell’s) to simultaneously solve a strategic problem for the customer while creating a differentiated market for themselves. The interesting question is when looking at the “Value Creation Half-Pipe,” what value does Cargill provide to Campbell’s? Certainly reduces the regulatory, brand, and potential legal risks from selling high salt products. Maybe also reduces the risks associated with market share losses to other competing low salt products. On the uplift side, is Campbell’s able to achieve higher margins? Certainly the cost of salt as an ingredient rises, but can Campbell’s margin up with their healthier product?
Kraft's marriage with Cadbury Article http://www.businessweek.com/managing/content/feb2010/ca2010028_928488_page_2.htm Kraft’s acquisition of Cadbury has been part of every conversation in the agbusiness industry. Both companies are prestigious brands with solid global markets, this merger of Kraft and Cadbury will control 15% of the world’s confectionary market making it the largest. In respect to business relationships, this merger in terms of annual cost savings, is predicted to save Kraft about $625 million in procurement, marketing and R&D. Kraft will take advantage of these cost reductions by using Cadbury to tap into the luxury segment of many emerging markets like India and Latin America. So far this all sounds good for Kraft, but what benefits does Cadbury receive? Cadbury benefits from Kraft’s huge amount of financial resources and assets to make products like Chocolate bunnies and Dentyne Ice at cheaper costs. The merger in the long run is expected to increase sales 5% annually. This relationship will work in the long-run.
Arby’s has made a joint venture with McLane as its distribution channel. This will help Arby’s to expand its market shares in Texas and surrounding states by using McLane’s great distributing system.
I think it is a good idea for Arby’s to be partnered with McLane due to the benefits they will receive. Being a partner with McLane, McLane will provide many services to Arby’s such as logistics, procurement and inventory management solutions. In addition, a vice president of supply chain at Arby’s Restaurant Group said that McLane’s efficiencies have supported their growth as a world-class supply chain organization. On the other hand, McLane is also happy being a distributor of Arby’s because Arby’s is a great and successful restaurant.
I think this is significant because both of the companies are benefited a lot from this joint venture. I think overall it will increase both companies’ profitability and will build a strong relationship between them. Plus, as Arby’s expansion increases, it will create many jobs for people.
I think it is not easy to pick a good business partner like Arby’s and McLane. There are various criteria to be considered in order to make such decision. For example, they need to consider whether they are sharing the same objective and code of ethics. This will prevent unnecessary disagreements which can disrupt sales. They also need to think about the image and the reputation of the companies and whether they received positive customer feedback.
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http://www.food-business-review.com/news/arbys_beefs_up_relationship_with_mclane_for_texas_market_091117