Daily Archives: November 21, 2010

What’s the Fastest Way to Lose a Supplier?

It’s a good question, but is it one that has a statistically backed up answer? I have to admit, I don’t know, but I’d like to.

Recently, I came across this article over on the Get Satisfaction blog on the fastest way to lose customers. According to the article, the top three reasons that customers leave a company are because:

  • they move to the competition
  • they are dissatisfied with the products and service
  • they don’t like the treatment they received

However, most of the time, it’s because they don’t like the treatment they received. In fact, that’s the case seven (7) out of ten (10) times.

But how often does a supplier leave when they don’t like the treatment they receive? My guess is not very often. As long as the bills get paid, suppliers will put up with a lot more than customers, even if they shouldn’t. However, go long enough without paying your bills, and your suppliers will probably bolt faster than lightening after serving you with a summons. However, depending on order size and frequency, it could take a while before the amount owed is enough for the supplier to drop you.

So what is the fastest way to lose a supplier? And how do you prevent it from ever happening?

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Don’t Exclude Natural Disasters from Continuity Planning

Even though the probability of certain events may only be once every one hundred years, the reality is that they’re going to happen eventually, and now that your supply chain is global, the chances of being affected by a natural disaster, even half a world away, are many times greater than they were even twenty (20) or thirty (30) years ago. Plus, as per this recent article over on the ISM site on being in the eye of natural disasters, the Emergency Events Database (EM-DAT), managed by the Centre for Research on Epidemiology of Disasters (CRED), recorded 3,770 natural disasters worldwide recorded between 2000 and 2009 with an economic impact of over $863 Billion. In other words, on average, there are 377 natural disasters a year costing the supply chain 229 Million each — more than enough to bankrupt even your average large company if it is operating on a razor-thin margin and unprepared for the disaster!

You need a plan for major disruptions caused by natural disasters, be they local to your operations or halfway around the world where they are local to your raw material / component / contract manufacturing suppliers. A natural disaster in either location, or anywhere in between along your normal distribution routes, will knock out your supply chain for an indeterminate amount of time. Thus, as suggested by Bernie Hart, an Executive Director of J.P. Morgan, supply management professionals should be assigning weights to specific transactions of components and products in the supply chain and planning appropriately. What-if scenario simulations are imperative for anything with a significant weight, such as high-volume shipments, high-value shipments, customer-critical components or shipments with delivery penalties associated with them. These simulations should include participants throughout the supply chain to ensure a uniform understanding of what is critical for the business, where the key process triggers are and how suppliers will meet your commitments in the event of a mass-scale interruption.

You need to be planning proactively and putting plans in place for contingencies when your operations get knocked out by a natural disaster — especially considering disasters of all types (hurricanes, tsunamis, volcanic eruptions, etc.) seem to be increasing in recent years. You don’t necessarily have to spend money preparing for execution until the need arises, but you have to spend money creating and fleshing out the plans that will allow you to act fast when a disruption does occur. And, as the article suggests, you should invest in the appropriate analysis technologies to help you identify the biggest risks upon which your contingency plans should focus.

The article is very well written and I would suggest you check it out — it also has some good ideas for contingency plan components. If you are unsure where to start, consider bringing in some outside help who are experts at continuity and disaster recovery planning who can bring with them additional benefits. After all, consultants are cheap.

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