Last year, customers were the focus of my New Year’s resolution. With the big freeze hitting retail sales and the increase in VAT to 20%, this is still very appropriate. However, I think it is now time to look back, not on last year but supply chains.
Of course, one way to increase profit is to get more sales and one way to improve cash flow is to collect money from customers sooner. But reducing cost and extending supplier payment terms can be equally productive.
There are two ways to approach this – aggressively or constructively. It would be counter productive to extend payment times without the supplier’s consent. Just look at the reaction to Invensys Rail recent announcement. For products – they could simply stop supply and leave you to pick up the cost of stockouts and lower customer service levels. For services – they could keep you waiting or under deliver. However, many will be prepared to negotiate on both price and payment terms for larger, guaranteed or call-off orders, new business and promotional activities. There is always room for negotiation with suppliers – existing and new. Perhaps there are alternative suppliers who would be keen for new business.
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Last August’s blog highlighted the emergence of the ‘Networked Entrepreneur’. These networked entrepreneurs not only use their networks to gain new business but to deliver new services often to existing customers. So, reconfiguring your supply chain can result in new product or service offerings.
Remember to act responsibly with suppliers. In terms of payments, you won’t go far wrong by following the ‘Doing Business Together‘ principles.
Perhaps 2011 is the year in which to renegotiate with both existing and new suppliers and to reconfigure your supplier network in order to reduce costs and innovate your customer offering.
Prof Nigel Lockett FRSA