Loyalty has always been important, but in this day and age it has become increasingly essential in all types of businesses. Loyalty within the supply-chain is no exception, as it can foster a common vision and the ability to offer best practice solutions, which can ultimately reduce costs in the long term.
One of the biggest challenges of fostering loyalty within supply-chains is demonstrating your worth to procurement teams, who in many cases drive the re-evaluation of suppliers and make the key purchasing decisions. The problem for existing suppliers, is that unlike your day-to-day client contacts, who see the benefits of your service first-hand, procurement often sit outside of this and once they’ve procured the service they step away, making it very hard to see where you - as a supplier - add value.
It is always a contentious situation when loyalty is challenged, but it normally comes from the procurement department in the form of cost evaluation. Without doubt the most anxious moment for any business owner is to find that the general procurement function doesn’t possess the expert skills, knowledge and expertise in evaluating specialised services. This can often lead to poor comparisons and judgements with the danger that the cheapest bidder is rewarded, even though they may not have the required capabilities and may cost the client more in the long-term through poor service and damaged reputation.
The current economic climate is another area which makes it more challenging for loyalty to grow, in particular, when it comes to establishing outsourced functions. Although saying that, there has been an increased move away from e-auction activity as it predominately highlights fears and negatives. If a procurement company is involved, they will naturally be under pressure to at least save their fees, but if the costs are already at a realistic level or lower, then this can become a problem. Cost will always be the key driver, but added value is equally important and should have greater weighting when making evaluations.
In order to overcome these challenges, fostering loyalty is essential. Once the hygiene factor of meeting the SLAs has been met, engagement and communication form the foundations for long-term, mutually beneficial supply-chain relationships. In terms of engagement, winning the contract is one thing, but retaining, developing and improving it takes hard work. This can’t be done blindly and the client has a key role in working with its suppliers to make the service the best it possibly can be.
Complacency can be a killer in terms of loyalty, so regular communication is absolutely key. A good supplier should be challenging the transparency of their offering and continually feeding back to their clients on what they are doing and how they are making a positive impact on the business. The client also has a responsibility to develop the relationship for the long-term, by monitoring their suppliers and providing feedback on performance. This way the client is loyal to the supplier and vice versa.
As with most things of value, loyalty doesn’t come easy and is something that has to be earned, but once it has been it can provide the stability and impetus for continuous improvement and growth.