Friday, October 14, 2022
They say don’t bite the hand that feeds you and, in business, that immediately gets us thinking about our customers. Of course, we wouldn’t intentionally draw blood from someone buying our wares or services and contributing to our bottom line.
However, all this simplifies things somewhat. Ok, all companies have something to sell, and they pitch it at a target audience, some of whom will buy it. If enough of them do so and the price point is right, a firm starts to make more money than they spend and begin putting cash in their pocket. In other words, they become profitable.
There are various ways to define profit margin, but they all involve making this key calculation between what’s coming in and what’s going out. It should be obvious then that looking at only one is narrow-minded. One is just as important as the other. So, where is the hand that feeds you? And when might you unknowingly bite it?
Well, quite literally, it’s your suppliers. If your business is anything like mine, there will be regular (fixed and variable) costs for product suppliers; public relations consultancy; maintenance; vehicles; legal; IT; and so on. It’ll likely add up to approx. 50% of turnover, which is probably less than payroll (say, 30%), and other costs.
People understand that businesses go under without customers, which means there’s a tendency to focus too narrowly on them—and it wastes energy. Nobody needs reminding that they shouldn’t punch their top customer in the face upon the latest delivery or project sign-off. Anyone who takes custom for granted shouldn’t have a place at your company. So, the real skill then is in managing suppliers and making them work towards the same bottom-line goals.
Don’t look at suppliers as a cost. We think of them as alliance partners; we know that without them we cannot supply our customers and there’ll be no hand giving us revenue, let alone one to feast upon. It’s important that business leaders make this pivot because too often—and especially in recent times when challenges have been aplenty—people have looked to suppliers to cut corners, save money, or pinch a bit on the bottom line. Guess what you’re doing when you go down this route—you’re biting the hand that feeds you just the same as if it were the outstretched limb of a client.
I’ve seen it throughout my career that when a supplier is treated with respect, they deliver better service. When they feel part of a team, they want that team to win. When they know they’re getting paid fairly and promptly, the service (or supply) is fair and prompt in reply. The opposite is also true; upset a supplier and it’ll come back to bite you, and not always on the hand. Ask for more, for less, and everyone loses. If you’re seeing margins squeezed or revenue dwindle, chances are they are too, so it isn’t wise to compound the problem with unreasonable cost or service expectations.
When I’m in dialogue with suppliers (try it—most don’t), I ask them what makes them go above and beyond for their customers. Rarely do they say, it’s in response to confrontation or hairdryer treatment from those that pay their bills. More frequently, they say they deliver the best value and quality to the companies that make them feel part of their team.
They also acknowledge that, regardless of what their customers say or do, they’re also highly motivated by fighting off their competition. The more you learn about supply chains, the more you realise how it pays to work together, regardless of which way the money travels.
It’s a myth that giving a supplier a hard time about a small price increase or late delivery, will result in them looking to compensate you further down the line. More likely, when they get an opportunity to add value to the service, they’ll pass that onto the businesses that showed respect and leniency in those difficult moments. If you’re the type to tear a strip off a supplier, think about when the last time was that they reached out with a special offer to service enhancement. In other words, have you bitten the hand that might have fed you?
Loyalty only goes so far, of course. No supplier relationship we have is set in stone to the point that we’d never part ways. But there are ways of managing things when issues arise. It’s important to be fair and tell a product or service provider when you see a shortcoming. We have different suppliers in the same sectors so we can constantly compare the product and costs, etc. It goes without saying that we give most business to those we have the best relationships with, but it’s better if all the eggs aren’t in one basket.
Smart businesses not only partner with suppliers to achieve growth, but they make sure that the supply chain evolves with them. It’s been widely reported in trade media that our Gemmak Engineering division is contributing to our growth, including to service Hinkley Point C and other UK nuclear projects. Gemmak is even at the heart of long-term nuclear strategy here. Onboarding a machine shop has inevitably meant that our requirements have changed. Suppliers have had to adapt to scale. Where we might have ordered £5k-worth of product a year ago, that might now be £20k. As revenue and profits go up, so do supplier costs, and these partnerships become more—not less—important.
This guidance is more relevant now than ever before. Service remains key, and price has always mattered, but we’re now in a climate where having goods on time matters almost above everything else. That means if you had to choose a hand to bite, you might have to take a chunk out of a customer, not a supplier. I know that might take a moment to process but it’s true.
We didn’t make a big song and dance about walking the aisles of the Lifting Equipment Engineers Association’s (LEEA) LiftEx show in Aberdeen earlier this month (October), but we took an opportunity to catch up with key industry stakeholders. The show always serves as a barometer by which to measure the effervescence of our market, and the perception of our business among peers in our ferociously competitive sector. It was uplifting to hear that we’re continuing to build on our reputation. Our suppliers continue to play a big part in that success.
Rope and Sling Specialists Ltd