(This column originally appeared in Entrepreneur)
Opinions expressed by Entrepreneur contributors are their own.
The article says Walmart’s Chief Executive Doug McMillon “delivered the warning in person last month in an appearance before companies that produce products sold by the company’s Sam’s Club chain. Inside a hotel auditorium, he said Walmart would be pushing back against suppliers’ efforts to raise prices, according to people familiar with the situation. Innovative products will spur more purchases, he added, according to these people.”
My clients chuckled along with me when they read this story. “Wow,” said one who echoed the sentiments of most others. “Must be great to be Walmart, don’t you think?”
It surely is. But unfortunately, most businesses can’t do this. We can’t just tell our suppliers, “hey, that’s it, no more price increases.” We’re not Walmart. But there are plenty of things we can do to minimize price increases and maximize the relationships we have with our vendors and suppliers, particularly in these difficult times of high inflation and supply chain challenges. And my best clients are doing these things right now.
For example, I’ve seen many companies step up their vendor communications over the past few years. They’ve doubled down on their customer relationship management platforms by scheduling updates, reminders, alerts and workflows to automatically send emails and texts to vendors about open orders, lead times and delivery dates. They’re on the phone weekly — even daily in some cases — with their key suppliers to make sure commitments are on track. They’re creating web portals showing order status that integrates with their suppliers’ systems. They’re doing this so that their customers have as much information as possible. By doubling down on communications, my best clients have improved their relationships with their vendors and together have worked hard to avoid any surprises that would upset any of the parties involved.
And you know what my best clients also do? They pay their vendors on time. Please don’t listen to the consultants and “experts” who advise you to “squeeze your suppliers” and “leverage them for financing.” This is not how you build a successful relationship. This is how you upset a strategic partner. Because how would you feel if a customer independently and without warning extends their payments because they’re “leveraging” you for their own finances? What happens the next time that customer has an urgent need for your products? You’ll likely put that customer behind the other customer who pays well and treats you with respect. That’s how you should be behaving with your vendors too.
Speaking of paying on time, many of my clients hunt for discounts by paying early. Some suppliers like to offer early payment discounts so, if you’ve got the cash, why not take advantage? In many cases — particularly where standard 2% discounts are offered within ten days of payment — the money you can save is significantly higher than leaving that same cash in the bank. So if your cash flow can accommodate, then take advantage of those offerings. Your vendor will love you. And so will your accountant.
To really maximize your vendor relationships, plan ahead. My best clients who have been running their companies for years all have this one thing in common: they’re always thinking of the future. They don’t like surprises. They do their best to know what’s coming before it happens. Look at your historical purchasing patterns. Analyze your open orders and jobs. Dig into your prospect pipeline of pending projects. From there talk to your suppliers and make longer-term commitments. They’ll love you for that because who wouldn’t love someone that’s promising something in the future (and of course who meets those promises)? In return for their love — and maybe an upfront deposit — ask for better pricing. You’ll probably get it if your order is big enough.
All that love is great, but regardless of being loved let’s also admit that relying on just one vendor isn’t exactly the best strategy. Things change and circumstances sometimes get beyond people that have the best of intentions. As we know, sometimes people don’t do what they say they’re going to do. And when that happens you’re stuck telling a customer that their order is delayed because a supplier is delayed. You need to avoid these situations and the only way is to make sure you have alternates. I don’t care how loving your supplier relationships are, people fall out of love all the time. So make sure you’ve got backup suppliers in place. Spread some purchases around to keep them happy. Include them in your communications and nurture your relationships so that — if push comes to shove — you can move to Plan B if need be.
Finally, the best way to improve your vendor relationships is to not only buy more stuff from them but to also help them grow their businesses. Refer them to customers when you can. Make introductions. Include them in your business network. These are your partners. The more you help them succeed the more they’ll be able to help your business.
No, you’re not Walmart and neither am I. We can’t just tell our suppliers not to raise prices. But we can minimize costs and maximize our relationships with them by just taking the steps I’ve suggested above. Given the economic environment we’re in, this is not just a best practice. It’s a must-practice.