Secrets to White Hot Supplier Relations
Guest contributor: Jim Kelly
CEO and Co-Founder of JVKellyGroup
Sometimes an internal evaluation reveals the need for behavior modification to be truly successful. Change is hard, particularly when it comes to altering behaviors that are ingrained in how people work and interact with others. But, sometimes they are necessary. Here are three ways companies can improve relationships with suppliers, starting with their own internal teams –
1. Identify the behavior you want to modify, how it impacts supplier relationships and where the behavior exists. No two people, companies or even departments are alike. To diagnose a problem with a supplier and to develop a plan to maximize the benefits of the relationship, companies need to start by looking to the department that works with that supplier.
Part of supplier relationship management is questioning the users involved and understanding the culture at a department level. The users are typically the most influential when it comes to decision-making, even if they are not the ones officially signing off. Catering to senior management or the economic buyer is a missed opportunity to get a true sense of how relationships within the department and with their vendors works.
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2. Recognize where there are problems or breakdowns in the system or with power users that can cause problems with suppliers. This may be as simple as understanding the power user’s expectations and metrics for success.
A very likely scenario could involve office suppliers. An office manager places an order for copier paper. The supplier knows that the company places the same order every month. To help save them money and cut down on shipping costs, the supplier sends two shipments at once. But, rather than being happy with the cost savings, the office manager drops the supplier. What the supplier didn’t realize – and what wasn’t shared at the outset – is that it is a burden to find room to store all the extra paper. The extra cost of repeated orders was worth it to the office manager to not have to find space to store the unneeded supplies.
Understanding the power user’s motives can help set expectations and help to avoid confusion and frustrating experiences.
3. Manage the supplier relationship based on market position. Managing the relationship helps control spending and sets expectations for the amount of transactions that will take place and ideally lead to cost-savings in the long run.
For example, if a company is purchasing printed materials they can use the paper and pulp index and their knowledge of what is happening in the market to work with the supplier to set prices. Understand if a supplier is paying less or more for materials, and how those savings can be passed on. Suppliers and buyers can work together to understand how to better manage the commodity – including placing forward orders to lock in prices.
The key takeaway for managing relationships with suppliers is to take into consideration how you do business – at a department level – when setting parameters and selecting partners.
EU and US agree end to Airbus-Boeing supply chain tariffs
The EU and US have agreed to resolve a 17-year dispute over aircraft subsidies, suspending tariffs on billions of dollars' worth of goods that have plagued procurement leaders on both sides of the Atlantic.
Under an agreement reached by European Commission Executive Vice-President Valdis Dombrovskis and US Trade Representative Katherine Tai on Tuesday, the tariffs will be halted for a period of at least five years.
It will bring an end to punitive and disruptive levies on supply chains that have little to do with the argument, which became embroiled in the trade battle. Businesses on both sides of the dispute have been hit with more than $3.3bn in duties since they were first imposed by the US in October 2019, according the EC.
The US imposed charges on goods upto $7.5bn in response to a World Trade Organisation ruling that judged the EU’s support of Airbus, its biggest aircraft manufacturer, unlawful. A year later in November 2020, the EU hit back. The WTO found the US had violated trade rules in its favourable treatment of Boeing, and was hit with EU duties worth $4bn.
In all the tariffs affected $11.5bn worth of goods, including French cheese, Scotch whisky, aircraft and machinery in Europe, and sugarcane products, handbags and tobacco in America. Procurement leaders on both sides of the fence were forced to wrestle with tariffs of 15% on aircraft and components, and 25% on non-aircraft related products.
Boeing-Airbus dispute by the numbers
- The dispute began in 2004
- Tariffs suspended for 5 years
- $11.5bn worth of goods affected by tariffs
- $3.3bn in duties paid by businesses to date
- 15% levy on aircraft and 25% on non-aircraft goods suspended
Both sides welcome end to tariffs
European Commission President Ursula von der Leyen branded the truce a “major step” in ending what is the longest running dispute in WTO history. It began in 2004.
“I am happy to see that after intensive work between the European Commission and the US administration, our transatlantic partnership is on its way to reaching cruising speed. This shows the new spirit of cooperation between the EU and the US and that we can solve the other issues to our mutual benefit,” she added.
Both aircraft manufacturers have welcomed the news. Airbus said in a statement that it will hopefully bring to an end the “lose-lose tariffs” that are affecting industries already facing “many challenges”. Boeing added that it will “fully support the U.S. Government’s efforts to ensure that the principles in this understanding are respected”.
The US aerospace firm added: "The understanding reached today commits the EU to addressing launch aid, and leaves in place the necessary rules to ensure that the EU and United States live up to that commitment, without requiring further WTO action."
This week’s decision expands upon a short-term tariff truce announced in March this year. The EC says it will work closely with the US to try and further resolve the dispute, establishing a Working Group on Large Civil Aircraft led by each side’s trade minister.
Airbus last month signalled to suppliers that post-pandemic recovery was on the horizon, telling them to scale up to meet a return to pre-COVID manufacturing levels. “The aviation sector is beginning to recover from the COVID-19 crisis,” said Airbus chief executive Guillaume Faury, adding that suppliers should prepare for a period of intensive production “when market conditions call for it.”