I’ve spent the last few months on chemotherapy and have had to visit the chemo clinic every three weeks for four-hour refills. When I arrived for my first treatment, I was scared, having no idea what to expect and was not at all fond of having metal projectiles shoved into my body. I was taken in hand by one of the nurses there, who put me in a chair and then asked me if I had any questions about what was about to happen. My chief question was “What is it going to do to me?” but as nice as the nurse was, she couldn’t peer into my future. But it was nice to be asked. She stuck me and I started to get what felt like eight quarts of chemicals fed into my body.
The nurse checked back with me about every five or so minutes. During the treatment one of my injected chemicals made me freezing cold and the nurse, seeing it, asked if I would like a blanket. “I’d like two,” I said hopefully. She not only brought me blankets—she brought me heated blankets, which helped tremendously.
Each time I have gone to the clinic, another nurse has taken me to a chair, gotten me comfortable and started the drip. I have also had many interactions with the front desk and other nurses in the clinic. As yet, I have not come across one nurse who is not unfailingly polite, helpful, and clearly focused on my needs. Because this has not been my experience with medical professionals (or in retail situations), I asked to speak to the manager of the clinic to find out how she had brought together so many competent customer-focused people. I was able to make an appointment with the manager.
She said that she would interview folks to see if they were kind and if they were listeners. I asked her how she was able to determine this. She said that she could tell if people were listeners in the first five minutes of the interview. If the interviewee interrupted or was clearly more interested in their next comment rather than what the interviewer was saying, she crossed them off. She said determining kindness was more difficult. She said she used a combination of direct questions (Give me a time when your empathy saved a difficult situation.) but also body language. She began moving like a woman in pain, with grimaces and low moans. If the interviewee asked about what was wrong, she won points. If she listened carefully to the interviewer’s explanation of the pain, she won more points. The clinic manager then said that ultimately she listened to what her gut told her about the interviewee. She said that her process required interviewing many more people than similar clinics would interview for similar positions but she also felt she had a good group of people, a sentiment with which I agreed.
I believe there is a huge lesson here for businesspeople. If you hire kind listeners—not just for customer service positions but also for executive, managers, supervisors, line employees, salespeople, warehouse people, you will end up with customer-focused people. It will cost you more interviews. But ask yourself how much non-customer-focused people have already cost your company. JS
Softair Ag's CEO, Gabriel Weisskopf has hit another one out of the park. In a recent parable from his Opinion column in Air Cargo World, he recounted the tale of an uncommon service provider, led by its CEO, Hugo First.
In contrast with the parade of usual suspects who took PowerPoint and bombast to new lows, glazing the eyes and numbing the senses of the selection committee, Hugo brought only a flip chart and a bizarre attitude. After writing, "I am not here today to sell you anything," Mr. First admitted that he had really come "to find out what kind of buyer" he was dealing with.
Horror ensued. No brochures, no testimonials, no incomprehensible "value propositions." What was going on?
Actually, the approach is one that might signal bright prospects in a budding business relationship. After all, what kind of business partner is interested only in: 1) itself, and 2) how to get you to buy something, and soon?
Maybe the the right kind of service provider is one who's interested in the longer term, and how good the fit is between it and you. Or art least, wants to take the time tom understand you and your people before crafting approaches and solutions designed to actually solve real business problems in the supply chain.
Is this tactic sheer insolence on the part of a service provider, or an intelligent means of beginning to build the foundation of something sustainable - and valuable?
One of my favorite parts about Columbus, Ohio is the Short North. I enjoy all the independent restaurants and shops. I just read an interview with a local business owner, Ryan Vesler, owner of the popular t-shirt company Homage. He is opening a shop in the Short North soon, and has a great interview in the Metropreneur.
Before starting Homage, Ryan said he was selling vintage clothes on eBay-- he says it was that experience that gave the biggest insight into the importance of customer service and his relationships with customers.
This is such an interesting insight, particularly because the natural assumption is that e-commerce eliminates customer service.
What do you all think? Do you have any experiences with e-commerce and outstanding customer service, or a bad experience from a lack of e-commerce customer service?
So, now I read that many carriers and service providers are struggling with capacity issues. They cut back, mothballed, whatever, when the economy turned down.
But, we've been preaching the need to get ready for recovery for the better part of two years. Those who didn't listen are now paying a price. Those who did are clearly going to wind up ahead of those who chose not to develop rapid response capacity alternatives.
It's difficult to work up much sympathy for either extreme: those who spent like inebriated seamen in the teeth of recession, or those who refused to believe that down cycles are always followed by up cycles. Either approach risks the success of the supply chains involved, and jeopardizes the market position of innocent partners in the end-to-end chain.
I should come as no great shock that the companies caught up in the failure to marshall capacity additions as volume picked up are likely not to be invited to next year's prom - plunging them back into the abyss of the depth of recession while the economy around them recovers.
Stadia emptied, vuvuzelas silenced, the Netherlands team has four years to contemplate what might have been in their resurgent prominence in the world of World Cup soccer. FIFA has a shorter time to assess the salutory effects of public hanging for sight-challenged and judgement-impaired referees. In the meantime, we'll don our colors and pull for Ajax, the pride of Amsterdam.
Back in the real world, the good news is that our universe of supply chain management is making headlines. That's also the bad news. USA Today's July 8 Money section carried a top-of-the-fold feature on shipping bottlenecks and their negative impacts on cost and timeliness. Our friend Rosalyn Wilson was cited (but CSCMP's production of her annual State of Logistics study was not mentioned - another rant for another day).
The problem was blamed on recession-driven capacity cutbacks in air cargo, ocean shipments, and truck transport. Adding container shortages to the mix makes marine transport the most severe manifestation of the problem, with shipping volumes increasing while Chinese container manufacturing has been seriously curtailed.
But, some of the damage was self-inflicted, and some continued difficulty is a matter of choice - an investment in short-term pain in exchange for a payoff in longer-term financial pleasure. Carriers (of all types) embraced sharp price cuts in order to keep operating - even at a loss - when times got tough. Many shippers took advantage of a perceived desperation, and turned the screws even tighter.
Now, the carriers want to get well - and fast. The USA Today feature reports a 150% increase in transportation costs (following the historic decline of 2009). Significant additional increases lie ahead, with re-activated capacity lagging demand. Some observers maintain that the ocean carriers' recent practice of "slow steaming" is a faux green maneuver to mask a cynical manipulation that reduces effective capacity - and creates unholy pressures for further upward price movement.
Despite the fine words and high concepts coming from many players in the global supply chain community, this scenario reflects a sobering reality about talking the talk versus walking the walk.
How often must we repeat these cycles of adversarial win/lose (and lose/lose) industry-wide confrontation? At some point, the strategists among us will learn to think, like Bobby Fischer, four or five moves ahead and build long-term business relationships. Real relationships will insulate genuine partners from the debilitating skirmishes that perpetuate the paradigm of creating immediate transactional focus, short-term one-sided gains, and long-term supply chain underperformance.
We know better; now we've got to do better. But, doing better requires that everybody - shippers, carriers, service providers - gets in the game. And plays to win-win.
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?
The Q1 issue of CSCMP's Supply Chain Quarterly (www.supplychainquarterly.com) features an article, Time for a checkup?, that suggests a thorough supply chain examination might uncover logistics cost reduction possibilities of ten to twenty per cent.
The approach proposed is well-thought-out, well-structured, comprehensive, and useful. And, yet, I couldn't shake the lyrics of a children's song, "Miss Lucy called the doctor, Miss Lucy called the nurse . . ."
My challenge with the piece is that the program appears to contemplate a more-or-less static and self-contained system, with singular control and direction. Some mention is made of variable service levels for different products, customers, and/or markets, and one illustration includes a cryptic note about "trucking and other service providers."
Ultimately, my contention is that optimizing one element of an end-to-end supply chain, without the involvement - and collaboration - of other players in the chain, risks sub-optimizing the whole. Not to mention that it fails to leverage the knowledge and experience of all partners in the chain.
The authors, Dr. Timm Gudhus, a consultant from Hamburg, and Dr. Herbert Kotzab, a professor at the respected Copenhagen Business School, do allow that "there continues to be a gap between logistics theory and business practice." It is possible that, in some dimensions, business practice might be out in front of theory. My hypothesis might be that the audit process described could be orders-of-magnitude more effective if greater weight were to be given to the integration and relationships among supply chain partners, rather than being limited to the mechanics of product flow.
Okay, we've heard from the doctor(s) and we've heard from the nurse. I've no clue what we might hear from the lady with the alligator purse.
Wal-Mart brecently announced an intiiative to take over the transport of products from its suppliers into its distribution network. The move might be seen as a natural extension of its traditional practice of requiring suppliers to distribute to Wal-Mart network locations, rather than to the individual stores. The ostensible objective? To reduce costs (and perhaps roll back some more prices).
Benign on the surface; possibly even commendable. But, what are the consequences, unintended or otherwise, on suppliers' relationships with their carriers and other logistics service providers? They'll have less product to ship with their (often long-standing) transportation partners. Those partners will have less business, overall. Maybe, with capacity reductions made during the recession, that's manageable. But the question is unavoidable. With lower volumes, will supply chain costs for customers and channels other than Wal-Mart increase? Will that make supply chains vying with Wal-Mart in the marketplace less cost-competitive?
Wal-Mart's prominence in the world of retail supply chains is enormous, and growing - and would be even bigger and more powerful with an inbound transportation takeover. Some observers go so far as to maintain that Wal-Mart is really a supply chain operator, as much as, or even more so, than a retailer.
I surely don't attribute all of the ethical failings of George Lucas' master of the interplanetary deal to Wal-Mart. But I am occasionally reminded of Budd Schulberg's anti-hero in A Face In The Crowd, who, in a memorable phrase, "brung happiness to millions."
Do Wal-Mart's increasingly dominant supply chain - and consumer pricing - positions contain the seeds of diminishing returns, or even backlash? Are its customers really all that happy with the seductive allure of low prices? According to the June issue of Consumer Reports, not so much. Wal-Mart's ratings kept it barely (by a single point) ahead of last-place Kmart (and it was next-to-last in 2002, as well).
Wal-Mart was ranked "worse" or "much worse" in eleven of sixteen categories, and "better" in none. Maybe that reflects the demographic skew of Consumer Reports' readers. But it could mean trouble if the humongous enterprise's future growth is tied to targeting increased penetration with middle-class customers - no matter what the supply chain costs are, and no matter how the company controls its supply chain relationships.
http://www.usatoday.com/news/washington/2010-04-12-tainted-meat_N.htm?csp=hf
The lack of specific governmental regulations on the contamination of beef is leading consumers to distrust the marketplace. Although the USDA’s Food Safety and Inspection Service tests meats for E. coli and salmonella, there is a growing issue with residue contamination in beef. Testing for these issues relies on assistance from the EPA and the FDA. Currently, there are no legal limits in terms of amount of pesticides or antibiotics. These risks directly will directly affect the public’s health.
It only takes a few stories about contaminated meat to deter end consumers from purchasing beef. Additionally, the screening agencies do not have the authority to stop the distribution of this contaminated meat due to the lack of regulation. The FSIS said in a written statement that the agency has agreed with the inspector general on "corrective actions" and will work with the FDA and EPA "to prevent residues or contaminants from entering into commerce." Will this be enough, or are the lobbyists correct in demanding specific laws and regulations?
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A major food service provider, ConAgra, builds relationships by finding qualified businesses who can conduct business on the same terms, conditions, and quality standards as other business suppliers. ConAgra looks for corporate partners who can provide a consistent product enabling ConAgra to pass on the consistency in the food they provide.
ConAgra also focuses on a culturally diverse employee base. ConAgra works with six Employee Resource Networks to ensure this diversity. The current six Employee Resource Networks include: ConAgra Black Employee Network, Women's Leadership Council, ConAgra Asian Network, ConAgra Latino Network, ConAgra Young Professional Network, and Illuminations. Each of these networks plays a large internal and external role for the company. Externally these networks provide volunteer support for community events and organizations.
http://company.conagrafoods.com/phoenix.zhtml?c=202310&p=comm_diversity
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?
Ralph Roberts is the President of Worthington Industries Integrated Building Systems.
He took a moment to talk with Kathy Hoyt and discuss the role of business relationships in his success and the success of Worthington Industries.
Kathy: How has your approach evolved throughout your career?
Ralph: I’ve seen the full spectrum from concentrating on personal relations to company centered Value Propositions.
In the economic down turn in the 80’s the personal relationships were being limited due to less money being spent on entertainment. The shift went to B2B relationships and became more professional.
Relationships are being replaced by associations and event shows instead of a high concentration on “entertainment”.
Today it’s about how your business value systems are similar to your customer’s business relationships value system so you can work together.
Kathy: Who helped you develop these skills?
Ralph: When I first started Worthington Industries 37 yrs. ago the company was small so I had access to the Executives. These Executives had a strong customer focus and I saw them dealing with customers on a daily basis.
The WI Philosophy was already in play and was being demonstrated in the contacts with customers. The philosophical needle was very important in all areas of the company and an esprit de core was developed and lived.
Kathy: How have the skilled contributed to your success?
Ralph: The skills applied to all aspects of the business. The philosophy was driven throughout the organization.
You got put into situations and had to deal with it. There were no training programs so you had to figure things out for yourself. Some survived and some didn’t.
The common values were the deciding factor. When faced with a tough decision, I did the following steps:
The Philosophy card “taught” you the skills you needed.
(Note: When Tom Peters interviewed John H. McConnell there were no written policies in place – only the Philosophy card!)
Kathy: Can you think of a time when the relationship saved the customer?
Ralph: The Tenneco Company had had a relationship with Worthington that wasn’t so good. When we called on the purchasing manager he said he would never to do business with us again.
After repeated calls over a period of two years, we were finally able to rebuild the relationship by showing them we could add value to their company. It turned out to be one of our largest contracts.
Allen Bradley was a targeted account for us and when first contacted, the said “no.” The account manager was instructed to call on them every 6 weeks, develop the relationship, show how WI could add value.
Our reasoning was eventually they will get in trouble and when they do, we will be there to help. It worked.
Kathy: How is business relationships managed as a core competency?
Ralph: Today the Philosophy is formally introduced in the orientation program and is reinforced through all facets of training and interactions.
Look at the card to make a decision. We also use the TIPS process we learned through S4 to improve our listening skills and really understand our customer’s needs.
In 2008, we started a “Transformation” that brought teams together to become more efficient. Customers are seeing improved quality, service and cost effective solutions.
When customers tour the plant, an operator is able to talk to the customer and tell them exactly what they are making for that customer. Customers feel good that WI is doing all it can to improve quality, service and cost.
Kathy: When did the relationship cause you to lose a sale?
Ralph: I had a great relationship with a customer and thought he would never take away his business but he told me that we weren’t competitive with our pricing. Just because you have a great relationship you have to remain competitive.
He gave all his business to a competitor! A good business relationship is good to have but not enough to keep the business.
Kathy: What advice would you give about building relationships?
Ralph:
Kathy: If you could give one piece of advice, what would it be?
Ralph: How well do you know your top 10 accounts? Not the statistics and number but what is their growth plan, fears, and can you help them meet their business goals.
Can they articulate how Worthington Industries is helping them? There should never be any surprises in working with one of your top 10 customers.
Kathy: How has the economy effective business relationship?
Ralph: There is now a new normal. Employees are being cut from the work force and organizations have to go deeper than they would like just to stay in business.
Trust gets hurt and will take a long time to recapture it. Some companies have had to cut the number of suppliers they are using just for economy of scale – even if it was a good relationship.
In some cases, some of the preferred suppliers have gone out of business forcing them to buy from a company they might not like.
Companies are worried about the financial stability of the suppliers even if the relationship is good.
These are very trying times but it will come back. As the market comes back WI will be well positioned because we have quality products, a quality company and financial stability.
Ralph Roberts has been with Worthington Industries for 37 years. He currently serves as President of Worthington Industries Integrated Building Systems.
He serves on the Boards for Worthington Armstrong Venture (WAVE), ThyssenKrupp Steel and Worthington Industries (TWB) and Spartan Steel Coating for Worthington Industries.
Ron Maciejowski is the Vice President of Sales for Worthington Industries. He sits on the board of all Worthington Industrial Joint Ventures and Recreation Unlimited.
Kathy Hoyt, a senior consultant with S4 Consulting, sat down with Ron recently. The interview is transcribed below.
_______________________________________________________
Kathy Hoyt: How has your approach to handling business relationships evolved throughout your professional career?
Ron Maciejowski: In the early days (1970's) there was more of the attitude that there was enough in a sale for everyone to be profitable. The pie was always growing and all parties could profit (our company, our supplier, our customer).
Today , many people think the pie is a set size which means you have to take the profitability out of someone else's pocket. To some extent that is true if we don't get back to growing our economy in the right way and making the pie bigger. This has put much stress on the customer/supplier relationship.
Kathy: Who helped you develop business relationship skills and how?
Ron: Mentors, the guys who brought me into the business. They showed me here's how we do it. You have to build the relationship to get close to the customer. You do that by:
Kathy: How has your attitude and/or skills contributed to personal or company's success?
Ron: I learned by example. If I made a mistake, I wasn't called on it openly in public. I learned to do the same things with my people. People are much more productive if not publicly reprimanded.
I also learned to listen to "the other side" of what was being said - try to understand both sides before jumping in.
Kathy: Can you recall a time when someone handled a relationship in such a way that it saved the sale?
Ron: Yes, there's been times when we walked out better than when we walked in. When there was a problem with a customer and it was our fault we would go in, accept responsibility, offer no excuses and get the problem fixed as soon as possible.
Other opportunities can evolve if you just admit it and fix it because if you can't fix it in a timely manner it will kill the relationship. As part of supply chain, we don't have total control over a situation but the main thing is don't make excuses - just fix it.
Kathy: Can you recall a time when the absence of a relationship has lost a sale or a customer?
Ron: We had a customer recently who didn't feel we thought he was important. A quote got to this customer which was completely inaccurate - way too high.
He assumed we didn't care about his business and we were just sending a quote to get it off our desk. We had been doing about 40% to 100% of his business and he pulled it all because we didn't appear to care enough about him. It certainly was not the case (many internal discussions about what went wrong) because it in fact was very important business to us.
We are working very hard to recapture our customers trust and confidence.
Kathy: What does Worthington Industries do make relationship management a core competency?
Ron: Everyone does it differently but our philosophy of treat the customer they way you want to be treated has always applied.
The philosophy is presented during orientation and reinforced. If someone doesn't buy into the philosophy, they usually don't last very long around here.
Kathy: How do you measure to see if business relationship management is working?
Ron: Amount of business from that customer, they tell us about opportunities for new business and if they come to us for solutions to help their business we know our relationship is solid.
Kathy: What advice do you have to give to people who want to develop skills in business relationship?
Ron: Listen to what the customer is saying. Everyone wants something from you. You just have to learn what the gap is (the difference between what they have and what they want) and then figure out what I can do to fill the gap.
Kathy: What one piece of advice would you give the people who are managing customer relationships?
Ron: Put yourself in the customer's shoes and treat him the way you would want to be treated.
Give the customer timely information, correct information and do what you say you are going to do.
Kathy: How do you think the economy has affected business relationships?
Ron: Everyone is fearful right now about their companies staying in business and their keeping a job.
People are more stressed and just want more time at home. The relationships today are on a more professional level than in the past. However, it is a mistake to assume that people don't buy on personal relationships.
That gets back to building trust, gaining confidence by doing what you say you will do and making the customer look good by providing excellent service and providing a high level of perceived value.
_______________________________________________________
Thanks, Ron!
Business Relationships Members, do you have any other questions for Ron or Kathy?
Ron Maciejowski began his career with Worthington Steel in 1972 and held various sales posiions until going into management in 1981. He has served as Vice President of Sales at Worthington Industries since 2008.
In the real world, partners in supply chains typically have widely varying skill, competency, experience, and maturity profiles. That's consultant-speak for "some players are stronger, and some are weaker." In leveraged and progressive supply chains, the stronger partners have responsibilities to lead, mentor, and teach the others how to get better, not only in raw performance but also in risk management and mitigation.
If the grown-up in the room finds that the other organizations in the overall supply chain can't or won't respond to the required leadership, perhaps they aren't the right partners. On the flip side, if the weaker players aren't getting the leadership and instruction they need to grow and eevelop, maybe they're in the wrong supply chain altogether, and need to find new relationships.
It's sad to see the "A" players and the "B" players pointing fingers at one another like 6-year olds in the wake of a problem. The "A" players have got to act like grown-ups, or maybe they're not really "A" players where it counts. Size and naked power alone do not confer grown-up status on a supply chain partner.
This challenge can become mission-critical for ultimate supply chain success in the marketplace when one of the partners is a logistics service provider (LSP, or 3PL). While it is possible that a relatively new 3PL can be manhandled by a big and savvy customer, it is frequently the case that the customer is less-experienced and less-aware than a diversified multi-customer service provider.
That's when the LSP - in a genuine supply chain business relationship - needs to be the grown-up in the room, and lead the customer to success, taking every care to not let the customer slip off the path into a dismal swamp of risk and failure.
Celebrations at about the time of the winter solstice have been a staple of many cultures across the millenia. North Americans' and Europeans' versions have powwerful religious roots, however much they may have morphed into secular adventures in retailing. The movement of goods stresses supply chains and relationships, and, as we ride the crest of this year's tsunami, business publications are making much of the struggles (including DC Velocity's perspective on toy sales, Toys: A Supply Chain Christmas Story, available at www.dcvelocity.com).
While we think of this annual surge of merchandise as a retail phenomenon, affecting B2C supply chains, there are many upstream B2B relationships that feel the pain of capacity, resources, and capability shortfalls. Suppliers take the hit a little earlier in the season, but their pain is real. Other supply chain partners caught in the riptide include carriers (in all modes), and those third parties providing warehousing, distribution, and fulfillment services to meet consumer demand.
Failure would not seem to be an option, but failures do occur. In toys, in apparel, in electronics, in confections - the list goes on.
Next comes the peak in returns, which inexorably follows the outbound peak, and which may involve even more third-party logistics service providers (LSPs).
This would not seem to be the time to be randomly selecting supply chain partners, and certainly not from the shallow end of the gene pool. It would seem to be the time when carefully built and nurtured business relationships with capable and committed partners pays off with exceptional execution, flawless recovery from challenges, the vision and stamina to get through the toughest times, and the reserves to really rev up performance after the storm has passed.
Have you been burned trying to get by with arm's-length performance in arm's-length relationships? Has the heat been turned up during seasonal peaks? Is this the time to re-think how you prepare to collaborate for a better peak next season?
A few weeks ago, I read a disturbing article in a respected business publication. It boldly stated that tough economic times demand pulling out all stops in Customer Service, even at the expense of personal and family commitments. The implication was that extra effort applied to all customers and prospects would create competitive differentiation. Hey, I've got news. I know a guy who sells insurance of all types, as well as investment instruments. I guarantee he spends more time, effort, and creativity on customers like Alex (A-Rod) Rodriguez and Dwayne (The Rock) Johnson that he does on some weasel out shopping to save ten dollars on his auto policy premium. This translates, I think, into lessons for B2B business relationships. And may raise some questions. For example, why isn't exemplary customer service (albeit stratified and customized to the situation) a minimum requirement in any economic environment? Or, how much will a client or customer respect and value someone who can't keep work and life priorities straight? And, do you really want a relationship with a customer who doesn't respect and value your total person? Beyond that, at the individual level, going beyond the "extra mile" (to what, a mile and a half?) for every customer is a shortcut to burn-out and breakdown. It is at the organizational level, too, and the breakdowns can be costly, even catastrophic. What do you think? Is working harder, not smarter, the answer? (My bias may be showing.) Is redefining customer categories and custom-crafting appropriate relationships a better way, at both individual and organizational levels? Is more effort on the low-priority prospects robbing you of time and energy for valuable collaboration with high-potential customers?
I've been railing, raging like Lear against the storm, for some time about the inevitability of a turnabout in the stampede to Asian off-shoring - and the creation of long-distance, difficult-to-manage, and arm's-length busineess relationships in extended supply chains. The pressures of escalating transport costs, rising local wage structures, increased inventory holdings, up-front cash requirements, and delivery uncertainties - among other factors - simply had to tip the economic equation sooner or later. Maybe it's finally happening.
The New Calculus of Offshoring from the October 2009 issue of CFO magazine (also available at www.cfo.com) hits the issues head-on, and reflects a recognition in the financial community that bodes well for a coming-together of traditional antagonists, accountants and supply chain practitioners. It's more than ironic that the same executives who argued for distant off-shoring a scant few years ago are now touting the competitive advantages of closing down many such operations.
The article cites a cornucopia of challenges in the old off-shoring model, including unsustainable cost savings, weak project management, poor communications, differing work ethics, error rates, costly travel for oversight, overseas wage inflation, inflexibility, and low speed, among others. It goes on to outline a number of options in sourcing and "shoring" (some a bit tongue-in-cheek).
But, shifting service and manufacturing functions creates mission-critical challenges in business relationships. Few of the moves are to in-sourced internal operations. Instead, they require the creation of new relationships with new supply chain partners, with all the risk and uncertainty implied in commitments to less-well-known entities. Further, sorting out the right (often blended) solution among the options is, in itself, a test of an organization's acuity in the front-end processes of deciding what kinds of relationships with which partners are the right value-adding combinations.
My opinion? These moves are no longer isolated events; they constitute an emerging trend. But, they're not yet mega-trends. This is the time for supply chain leaders (and those who want to be) to get the relationship act together. Prowess in this arena will be tested over the next couple of years.
At the end of the day, you'll not want to be Lear, lamenting, "The weight of this sad time we must obey . . ."
I traveled once again to the State of High Dudgeon this past week. The impetus was a review of purchasing negotiation strategies as practiced by a respected Fortune 500 company.
The prescribed approach was a rigorous application of the principles outlined in Getting To Yes: Negotiating Without Giving In, by Roger Fisher and William Ury. Good - even great - material in its time, but its time was 1981. I struggle with the application of tools and tactics that are nearing 30 years of age, without honing, refining, and adapting them for the requirements of 1) a new century, and 2) a radically altered supply chain landscape.
While somewhat enlightened, in that the aim is merely to hobble, not cripple, the other party to negotiation, the core premise remains that the parties are still on opposite "sides." This limitation severly inhibits the possibilities of what might otherwise be a collaborative - and winning - joint approach to the market.
Ultimately, the Getting To Yes model rests on a restricted (mis)understanding of game theory, as described in the breakthrough work, Theory Of Games And Economic Behavior, by John von Neumann and Oskar Morgenstern. Too many people look only at the zero-sum element of this 1944 seminal work. They see only the idea that one's gain can only come from the other's loss.
But, there are non-zero-sum games, as well, and there are models of coalitions that succeed. These are much closer to the reality of modern supply chains. Today, supply chain leaders and their key partners are on the same "side" in economic battles with other supply chains. And, in fact, competing supply chains can both win in a non-zero-sum universe, with the better coalition simply winning more than its competitor.
Maybe the Getting To Yes thing more-or-less works for arms-length transactions with non-esssential commodity providers. It seems to me to be a losing strategy for the long term when key product and service providers are kept on the other side of the table, and in the dark about where the future lies. Another critical misunderstanding in this arena is that a longer purchasing contract isn't remotely close to being a long-term relationship, with all the power and value-add the term implies.
What do you think? Are you locked in a zero-sum game?
David Maister is the consultant whose hard-won wisdom has guided an entire generation of consultants. He hasn’t written about key account management very often but in this essay (which later became Chapter 19 in his 2000 book The Trusted Advisor) he lists some points that are as insightful as anything else he has written. The article is called, appropriately enough, “Key Account Management.”
I’m going to list some of his insights verbatim and suggest strongly that you take a look at the article because it contains other real-world suggestions about managing key accounts.
Below are just a few of his points.
Key accounts’ commonly expressed concerns about suppliers:
Other insights:
All I can say is that if the points above do not offer some assistance with your key accounts, you must be in a unique market with unique accounts. Good reading. JSperry
"Quickly, Igor, the vise," hissed Dr. Frankenstein. "We have many costs to squeeze."
In initiatives worthy of the well-intentioned doctor - either the original or the Mel Brooks version - many companies are seizing on the economic downturn as a device to wring extreme price concessions out of vendors, suppliers, and service providers.
These moves may provide momentary satisfaction, and the transient approval of superiors, but the joy could fade rapidly, like the aftermath of the sugar rush of a bagful of Hallowe'en candy. Those briefly-satisfied superiors will soon want to know what you've done for them lately. And, relationships forged under duress may turn into monsters when our economy discovers whatever the new "normal" is. Consider again Dr. Frankenstein's monster, barely functional in controlled circumstances and a destructive force of nature under stress.
The long-term consequences of forcing business partners into low-to-no margin deals that they'll take "just to hang on to the business" might turn out to be deadly in a world of competitive supply chains. When your partners can no longer afford to invest in technology and innovation, your ability to deliver superior solutions to your downstream cuatomers becomes impaired.
Ironically, not only will that put your customer relationships at risk, your weakened supplier or service provider might not have the resources it takes to grow with the inevitably-coming economic recovery. That would undermine your competitive position in the good times we're all waiting to see.
So, why do companies engage in such destructive behaviors? Are they knee-jerk responses to their customers' imperatives? Are they simply taking advantage of weaker supply chain partners? Can they not see beyond the challenges of the moment? Or, do they just not know there's a better way?
What do you think? Let us know.