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Why is it important to build and maintain relationships with suppliers?

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Supplier relationships are critically important to the health of your business. If you want good delivery, good service, and good quality, then you need to keep your suppliers healthy and happy.  

I was born and raised in the United States and when I first arrived in Taiwan 20 years ago, I had what I consider to be a more American mindset about the relationship between buyer and seller; I considered that the “customer” was always right and had the upper hand in relationships with suppliers. If a supplier couldn’t meet a standard, you’d just switch and find somebody else. In the US, there’s a wealth of good suppliers who can meet your needs when it comes to services, clothing, food, etc. so this mindset is understandable.

In one of my first supplier interactions after arriving in Taiwan, a handlebar supplier delivered a production batch with a subpar finish. I was a bit rude with them and was not helpful in trying to resolve the situation. My thinking was that if they were not up to the job, we’d simply switch and find another supplier. It was only later that I realized that they were one of only three good handlebar suppliers in the industry at that time and I had managed to upset them.

That was a good early lesson for me.

Over the last two decades I’ve learned that you have to treasure your good suppliers. Good suppliers are hard to come by in manufacturing. Suppliers that can work consistently at a high level, that keep their promises, that abide by our standards for environmental and social responsibility, and that can do it all for a reasonable price, are few and far between.

Tern-Eclipse-S18-6718-HighRes

In fact, the really good suppliers often have more business than they can handle and they don’t NEED your business. In the bike industry, the good suppliers get to choose whom they do business with.

In manufacturing, there are always issues. Sometimes it’s quality. Sometimes it’s delivery time. Sometimes it’s miscommunication. Sometimes it’s some new law by the local government. The number of potential issues is infinite. If an issue arises and it’s your (or your company’s) fault, it is really important that you admit the mistake and set about fixing the issue. There’s almost no better way to torpedo a relationship than to blame the supplier for something that wasn’t their fault.

If the supplier is at fault, help them resolve it in the most cost-effective way possible. I look at supplier mistakes as opportunities for us to put some goodwill in the bank. When we mess up the next time, we can call on that goodwill and get some extra support from the supplier.

A few years ago, a supplier delivered a part with painting that didn’t meet our standards. The supplier’s factory was based in China and our factory was based in Taiwan. We could have just shipped all the parts back (at their cost) but it would have been prohibitively expensive, especially since they would have needed to pay import duties on the parts going back into China. But instead, we helped them find a paint factory in Taiwan to rework the part. They saved a lot of money in fixing the issue and we banked a lot of goodwill.

Also many years ago, a good supplier, one of the best in the bike industry, sold our branded, custom-designed bike component to a competitor. That would be like a Nike shoe factory selling the base of a Nike shoe (with Nike branding) to a competitor like Adidas. After getting over our initial shock we realized that the mistake was a true mistake, due to a miscommunication (their sales person didn’t realize that we owned the brand). The owner of the supplier approached me and asked what I wanted to do. I could have said, “Pull them all back, off the shelves and off the bikes”. But instead I said, “you make parts for other brands and when you sell them you pay them a licensing fee – why don’t you pay us the same licensing fee?” She seemed relieved and told me the license fee was about $0.03/part (very little). We shook hands and the deal was done.

Many years later, when we were starting up with Tern, that same owner was incredibly supportive and said to me, “You guys are going to be successful. I’m here to help. Just tell me what you need.” Those are the kinds of supplier relationships that are so important to the success of a business.

So when you look at your suppliers, look at them as partners that are helping your business succeed. By all means get rid of the bad ones but treasure the good ones.

Entrepreneurship

What Kills A Startup

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1 – Being inflexible and not actively seeking or using customer feedback

Ignoring your users is a tried and true way to fail. Yes that sounds obvious but this was the #1 reason given for failure amongst the 32 startup failure post-mortems we analyzed. Tunnel vision and not gathering user feedback are fatal flaws for most startups. For instance, ecrowds, a web content management system company, said that “ We spent way too much time building it for ourselves and not getting feedback from prospects — it’s easy to get tunnel vision. I’d recommend not going more than two or three months from the initial start to getting in the hands of prospects that are truly objective.”

2 – Building a solution looking for a problem, i.e., not targeting a “market need”

Choosing to tackle problems that are interesting to solve rather than those that serve a market need was often cited as a reason for failure. Sure, you can build an app and see if it will stick, but knowing there is a market need upfront is a good thing. “Companies should tackle market problems not technical problems” according to the BricaBox founder. One of the main reasons BricaBox failed was because it was solving a technical problem. The founder states that, “While it’s good to scratch itches, it’s best to scratch those you share with the greater market. If you want to solve a technical problem, get a group together and do it as open source.”

3 – Not the right team

A diverse team with different skill sets was often cited as being critical to the success of a starti[ company. Failure post-mortems often lamented that “I wish we had a CTO from the start, or wished that the startup had “a founder that loved the business aspect of things”. In some cases, the founding team wished they had more checks and balances. As Nouncers founder stated, “This brings me back to the underlying problem I didn’t have a partner to balance me out and provide sanity checks for business and technology decisions made.” Wesabe founder also stated that he was the sole and quite stubborn decision maker for much of the enterprises life, and therefore he can blame no one but himself for the failures of Wesabe. Team deficiencies were given as a reason for startup failure almost 1/3 of the time.

4 – Poor Marketing

Knowing your target audience and knowing how to get their attention and convert them to leads and ultimately customers is one of the most important skills of a successful business. Yet, in almost 30% of failures, ineffective marketing was a primary cause of failure. Oftentimes, the inability to market was a function of founders who liked to code or build product but who didn’t relish the idea of promoting the product. The folks at Devver highlighted the need to find someone who enjoys creating and finding distribution channels and developing business relationship for the company as a key need that startups should ensure they fill.

5 – Ran out of cash

Money and time are finite and need to be allocated judiciously. The question of how should you spend your money was a frequent conundrum and reason for failure cited by failed startups. The decision on whether to spend significantly upfront to get the product off the group or develop gradually over time is a tough act to balance. The team at YouCastr cited money problems as the reason for failure but went on to highlight other reasons for shutting down vs. trying to raise more money writing:

The single biggest reason we are closing down (a common one) is running out of cash. Despite putting the company in an EXTREMELY lean position, generating revenue, and holding out as long as we could, we didn’t have the cash to keep going. The next few reasons shed more light as to why we chose to shut down instead of finding more cash.

The old saw was that more companies were killed by poor cashflow than anything else, but factors 1, 2 and 4 probably are the main contributing factors to that problem. No cash, no flow. The issue No 3 – the team – is interesting, as if I take that comment ” I didn’t have a partner to balance me out and provide sanity checks for business and technology decisions made” and think about some of the founders and startup CEOs I know, I can safely say that the main way that any decision was made was by agreeing with them – it was “my way or the highway”. I don’t therefore “buy” the team argument, I more buy the willingness of the key decision makers to change when things are not working (aka “pivoting” – point 9).

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About the Author

This article was produced by Broadsight. Broadsight is an attempt to build a business not just to consult to the emerging Broadband Media / Quadruple Play / Web 2.0 world, but to be structured according to its open principles. see more.

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Callum Connects

Jasmine Tan, Director of Stone Amperor

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Jasmine saves her clients time and effort when doing kitchen fit outs with her biz Stone Amperor.

What’s your story?
I started working in the industry in 2003. I was in a marble and granite supplier company for 5 years. Even though I left the company, I still had customers calling me for my services. I referred them back to my previous company but they refused to because they loved the fast response service that I offered. I realised that customers do look at prices, however most of them prefer quality over quantity. Thus I have decided to establish a sole proprietor company also known as 78 Degrees which later rebranded as Stone Amperor in 2014.

What excites you most about your industry?
The kitchen countertop industry is a very confusing market. There are many brands, materials and prices to choose from. What excites me the most is my ability to help clients choose the best materials and brands within their budgets, whilst saving them time and effort.

What’s your connection to Asia?
I have been in Asia all my life and I love Asia. No matter where you go there is no place like home.


Favourite city in Asia for business and why?
I love Singapore. This is because Singapore has always been a stable country and it is great for doing business. However as it is a small country, it can be really competitive. I believe that if just do your best and give your best to your customers, you can overcome this.

What’s the best piece of advice you ever received?
“Take actions. Learn and improve continuously. An idea without action is just a dream.” This was really good advice that I received from my partner.

Who inspires you?
A very down to earth billionaire from Malaysia, Robert Kuok

What have you just learnt recently that blew you away?
Property is the foundation of every business.

If you had your time again, what would you do differently?
Own instead of renting property for my business.

How do you unwind?
I enjoy going shopping, watching movies and hanging out with friends. I am quite a simple being.

Favourite Asian destination for relaxation? Why?
I love going to Taiwan as I love the culture there. Everyone is so polite and the weather is great.

Everyone in business should read this book:
Sun Tzu, Art of war

Shameless plug for your business:
Perfect top, Perfect price, Perfect life from Stone Amperor

How can people connect with you?
Email me at [email protected]

Twitter handle?
@StoneAmperor

This interview is part of the ‘Callum Connect’ series of more than 500 interviews

Callum Laing is an entrepreneur and investor based in Singapore. He has previously started, built and sold half a dozen businesses and is now a Partner at Unity-Group Private Equity and Co-Founder of The Marketing Group PLC. He is the author two best selling books ‘Progressive Partnerships’ and ‘Agglomerate’.

Connect with Callum here:
twitter.com/laingcallum
linkedin.com/in/callumlaing
Download free copies of his books here: www.callumlaing.com

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