3 Keys to a Great Supplier Relationship

As a business owner or leader, how you treat people can play a huge role in your level of success. You probably already know to treat your clients, customers and employees well, but what is your relationship with your suppliers and vendors alike? For the best chance of success, it should be viewed more like a partnership and less like a dictatorship.

Golden Rule: Treat others the way you want to be treated.

If you are heavy-handed and demanding with a supplier, you’ll often find that the relationship becomes commodity-driven. When a relationship boils down to the only cost, there is an opportunity for someone to win and someone to lose. Sure, the prospective supplier wants your business, and in the short term, they’re probably willing to settle for less in order to ‘win’ it. However, we believe the more prudent long term approach is to understand what the supplier wants out of the relationship and find a way so that you both win, on both the price you pay and the way you interact. To do this, first approach potential suppliers and give them a clear idea of what you are looking for (volume, product specificity, etc.). They can give you an accurate price based on that, and you can negotiate from the perspective of making sure both parties win.

Also, ask your suppliers what they like about their best customers and what frustrates them about their worst ones. This will help you understand their motivation so you can meet and exceed their needs to have a good relationship that is driven by more than supply and demand.

Don’t constantly shop around.

You have a fiduciary responsibility, so make sure prices are competitive. However, there is no need to nickel and dime your suppliers. We change suppliers very minimally, and our food and paper costs are some of the best in the industry. When you are constantly changing suppliers, you’ll often spend more money on meetings and getting new companies up to speed and it’ll come back to bite you in the long term.

When a prospective supplier approaches Penn Station, I tell them both good news and bad news. The good news is that once you are working with us, you don’t have to look over your shoulder constantly because I’m not shopping around for simply a cheaper price. The bad news is that once we have our suppliers set, we don’t change often, so it is much harder to get your foot in the door with Penn Station. In 20 years, I’ve never had a prospective supplier say they disagreed with that position. In fact, more often than not, they tell me how much they respect that and hope to one day win our business for the long term.

Make sure you are on the same page about communication.

Regular communication is important so that both parties can talk about how the relationship is going, discuss any particular issues that may exist and make sure both parties are on the same page. It’s also valuable to understand trends your suppliers are seeing in their industry in terms of challenges that may affect supply, demand and pricing. To plan for this communication, many supplier companies travel regularly for either quarterly or semi-annual business review meetings. This travel can sometimes take the form of overnight stays (hotels, meals, rental cars) and flights around the country, ultimately impacting the profitability of the supplier, and unfortunately, possibly impacting your pricing structure with them as well. At Penn Station, we instruct our valued suppliers to do a phone call instead to offset the savings they generate from not incurring additional travel costs against the cost of our product our franchisees must pay.

I often tell our suppliers they do not need to babysit us regularly. You can assume if you do not hear from us, things are going well overall. We know they’re busy, too, and if the supplier relationship is going well, it may not be necessary to communicate as often. If you take this approach, your suppliers should intimately understand that when you do contact them, it’s important and you need to get a response quickly. From a franchisor perspective, our franchisees very rarely need to contact a supplier directly. I want them to feel they have complete access to the supplier network, but I also realize if they create too many inefficiencies for our valued partners, that too can and will impact the price all franchisees pay. Therefore, we expect any communication to filter through the corporate office so we can assess any potential issues from a high level with a view of the entire system (meaning: is the problem isolated or is it systemic?). That said, it is still important our suppliers are willing and able to communicate with a franchisee directly if the situation calls for it.

Creating a great supplier relationship is similar to creating any other type of partnership. Treat each other well, communicate regular, clearly lay out expectations and don’t constantly look over your shoulder for something better. If you nurture the relationship, you’ll hopefully find a vendor that can grow with your business because they’re both capable and willing to grow with you.