In today’s complex supply chain environment, no companies are able to deliver their product or service without the aid of suppliers and vendors. While we put a great deal of effort into building and maintaining a strong brand for our own end products and services, we are often negligent in extending our brand values and standards to our suppliers and vendors. We select them based on price and squeeze their margins with tough negotiations. The larger a business is, the more likely it is to see its vendors as replaceable and thus guilty of neglecting the partners that help them succeed. For example the current horse meat scandal in Europe has caused massive product recalls and sales losses for the food industry and tarnished brands such as Nestle, Burger King, and Tesco.
The brands themselves were apparently unaware of the issue and took appropriate action as soon as they traced the issue to dishonest suppliers. Unfortunately, the damage was already done. In addition to the massive cost of product recalls and reduced sales, a Nielsen study found that 2/3 of British adults said they would be less likely to buy frozen meat products in the future. The AdAge article claims that “The horse meat scandal has been variously blamed on overly long supply chains, reduced budgets for the food regulatory authorities, organized criminal activity, and unrealistic consumer demand for cheap products.” Meanwhile, McDonald’s, who has a rigorous SRM (Supplier Relations Management) program in place, capitalized on the incident, running an advertisement touting their 100% British and Irish beef.
Another great example of a company who invests in their vendor relationships is Zappos. While Zappos is renowned in the branding world for their excellent company culture and customer service, they also extend the same brand values and philosophies they use to win over customers and employees to their vendors. By treating their vendors as valued partners rather than numbers, they also earn the right to hold vendors to the same standards they use to measure the Zappos brand. This allows them to build strong, mutually beneficial partnerships with their suppliers and helps avoid pushing them into a financial position where they need to cut costs and deliver horse meat in place of beef to meet demands. Read a lesson to follow from Zappos — a firsthand account from the head of Zappos’ Merchandising team.
Although this approach may prevent you from making some “killer” deals in the short term, the long term benefits include vendors who:
- Are aligned with your brand values, are supportive of them, and contribute to competitive advantage (conversely, they are not a brand liability or, at least, the likelihood of their becoming a brand liability is lower)
- Go out of their way to support your needs and your business
- Are more likely to innovate and contribute their knowledge
- Aren’t pressured into cutting corners to meet your financial demands