The requirements of a preferred supplier has not really changed but there are lot of add-ons. Factors like compliance, development, delivery on time, price and quality have now become entry point norms. So, what’ s next …? A‘ preferred supplier’ cannot exist without a‘ preferred customer’. They have to have a balance with each other. You cannot be in isolation, since suppliers are now on a level playing field where they can say I have a good factory, I have a good understanding of business, I give you good price, I give you delivery on time, compliance; it is actually a‘ marriage’ between a preferred supplier and preferred customer. A preferred customer is one who has an understanding with a preferred supplier … This is what I need from you and these are my goals. Those goals may vary from brand to brand. These days you cannot have a preferred supplier who is waiting. You can only give these things to somebody, provided that somebody has the need to take these from you.‘ Me’ as a‘ preferred supplier’ can exist only if someone values me and somebody can value me if he has those things to give it to me.
The definition of a‘ preferred supplier’ will change from customer to customer
For Zara, preferred supplier means somebody who can give design and if the brand makes last minute changes, he can adopt those changes quickly and make sure that the brand still gets product on time and also alerts the brand when things are not going right. Somebody like Gap has a different perception about preferred supplier. They need units, capacity, price, delivery, quality and ensure you
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are offering all this as a package to me at same point of time. For Walmart, the definition of preferred supplier changes – I just need price. So, in short, a preferred supplier can exist only if you have a preferred customer. They go together and those needs can change.
My main market is the USA and my customers are looking for high-fashion ladies wear and kidswear, but are very pricesensitive, so the ability to give the right‘ price’ is very important. There are suppliers in Chennai, who can give me quality, delivery on time but can’ t give me good price and so are of no use to me. But I know they are great vendors. But he doesn’ t match my needs. My goals and deliverables do not allow me to work with me. Then another supplier in Bangalore may be able to give me price but still may not be a‘ preferred supplier’ as he may not deliver on time.
A great vendor may not necessarily be a‘ preferred supplier’
However, there are some preferred suppliers because they understand, and that is where relationships are built – long term relationships. Customers also need such vendors who can understand business, who can deliver on time, give quality, give the designs, be flexible, give price and are nimble and quick to work.
It is easier said than done. I hear many buyers say vendors are not responsive and they do not understand, but this is a wrong statement. Customers have to understand how suppliers think … Where do you see the business in 10 years, and is it worth investing in..., is a question that haunts the manufacturers. The country has seen a fall in GDP growth from
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7.1 % to 6.1 %… In GVA( Gross Value Added) terms we are actually 3 %. It’ s a huge dip and has affected sentiments. Only, if I see a growth in business, then I would like to invest. If there is a struggle and if we are fighting a daily battle, your head is not clear enough to say where I need to go. But, people are still growing …, things are happening but they are not happening to the scale at which it was happening 10 to 15 years ago.
The reality is that business is saturated. There is no influx of extra business coming. Input cost is going up, wages are on the high, so salaries are also increasing, and cost of doing business is going up. Notably, input cost is going up and FOB price is going down. One mistake and everything gets wiped out anywhere, so it is very challenging. So just to make a sweeping statement that
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A‘ preferred customer’ is one who has an understanding with a‘ preferred supplier’… This is what I need from you and these are my goals. The goals may vary from brand to brand.
vendors are unresponsive is incorrect. Understand the business has nothing to do with growth. Understanding the business means there are flexibilities which the businesses need.
Buyers have to also understand that there is a certain pipeline that exists, certain deliverables need to happen and we need to be mindful of what is happening in their lives too. Having said that, challenges are there, business is very soft. But customer too needs to understand the challenges of vendor – That is what a preferred customer is. It’ s a collaborative effort. You need to understand‘ me’ and I need to understand‘ you’ and that’ s how partnerships can be built.
‘ Business can exist only if you understand each other’ s needs and that’ s always been the sourcing hallmark’.
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