Decades of relentlessly chasing lower cost, and the inevitability of procurement and supply chain adversarial practices, meant that terms like “a single throat to choke” were commonplace. Who remembers that charming expression?
A phrase used to colourfully articulate that a single or primary supplier must take full responsibility in the event that something goes wrong, therefore, one company to blame. We thankfully don’t hear it very much anymore. Times and attitudes are changing. A power shift? Or something more profound, perhaps a paradigm shift in collective attitude. There is a lot of talk of suppliers now holding the power. Suppliers, for our part, aren’t looking for power. But they do want it recognised that they too are investing sometimes strategically, into a relationship.
Exploring the value imperative
The global director for procurement for one of our valued customers, BAE Systems, said during the pandemic:
“During turbulent times, our ability to generate savings from cost-based procurement strategies will diminish. Organisations will adopt positions to protect themselves against impending recession. To continue to deliver our ‘value’ targets we must work together with our suppliers, to innovate. Our suppliers will welcome this collaborative approach.”
The term “Customer of Choice” is not a new one, but it certainly has surged to prominence gaining pace over the last 3 – 4 years. The days of suppliers relenting, repeatedly surrendering margin, are at the very least a pre-COVID narrative. Quite frankly this was almost always a false economy. Cost in these situations is very rarely the price actually paid.
The back end of the pandemic is now transitioning into global economic downturn, amidst ongoing geopolitical hostility and a cost-of-living crisis. Companies are now [or should be] considering multiple disruptive scenarios whilst planning for the next three-five years. Whilst it’s true that turbulent times have always triggered recession type economics in any buyer-seller dynamic, typified by a drop or a squeeze in spending. Now, there are increasingly two schools of practice. One is on the rise, whilst the other – that race to the bottom, is on the decline.
The path to co-resilience
Whilst the bottom line is very important, it’s the “let’s do this together” top line that brings growth to a company, breathing room and resilience to enact change, to explore innovation, to protect products, services, & people. Here’s a quick explainer: a supplier provides services to two customers, one of whom repeatedly turns the margin thumb screw; whilst the other prefers to explore, collaborate, seeking together to address alternative ways to de-risk and to create value.
As a supplier where would you choose to invest? As make no mistake, that’s what this is. If you’re a supplier, you are investing; and your customers increasingly take the view that they want you to invest in them – so that they can be Your Customer of Choice. An earned status that brings with it the path to lasting resilience
But let’s not get too carried away. If you’re a supplier, you still need to be Supplier of choice! Supplier of choice & Customer of choice! A healthy dynamic. Certainly one based on meaningful synergy and collaborative exploration – where opportunities are likely to be both many and lucrative.
This is quite telling, a deliberate, planned and joint approach to creating both addressable and strategic value. These companies know there are limits to the value they can generate by focusing purely on the price of transacted products and services.
Customer of choice isn’t just a badge, it’s a Standard – and represents an increasing maturity of corporate mindset in favour of preferred longevity and a safer more co-resilient customer-supplier relationship. In these situations trust is the ultimate trading currency and the basis for more resilient supply chains.