Customer Relationship with Supplier

For a positive growth of business all customers have to depend, directly or indirectly, on good and reliable
suppliers. Apart from their expectations from the supplier the customers also need to be loyal to them so as
to strengthen their relationship. Therefore customers should work on building a strong and long-lasting
supplier relationship as they do with their own customers. And it is not a complicated process.
The positive customer-supplier relationship begins with the initiative of the supplier to demonstrate his
sensitivity to the customer’s needs. A customer always vouches for the conditions of his business deal with the
supplier and likes to be honest with them to have a smooth flow of business. But many non-serious suppliers
sabotage the deal in the beginning only by making the customer struggle to even getting a relationship
started.
The lapses and diversions on the part of the suppliers can affect their relationship in many ways as given
below:

 Satisfaction: The customer expects overall attention and convenience in all departments to ensure
smooth fulfillment of his needs. This includes quality, timeliness, ease of access and commitment of
conditions. He wants to believe that the supplier cares for him.
 Competitiveness: Customers assess the supplier through competition based on the pricing and quality
of their products, its reliability, its technological background and industry trends. These factors affect
the deal.
 Innovation: It is difficult for the supplier to divert the customer from their quality assessment.
Customer knows and lives the products more than the supplier does, as he is working on them and is in
a position to suggest innovation and development for the products.
 Finance: Suppliers have to be ready for providing financial advantages as loan, extended terms on
purchases and postponement of debt when demanded by their loyal customers particularly at their
growth stage or when they are into a financial crisis.

On the other hand suppliers also have a right to get their needs met as they are ultimately motivated by profit.
They want to be known as the best in their deals so they count on customer loyalty and satisfaction at all
levels which translate into direct benefit of both of them. Therefore it is only win-win relationships between
them in all stages of the customer-supplier chain to produce total satisfaction. It should be remembered that a
customer assumes his name only in relation to his supplier. As such in order to be a valued customer to
suppliers, here are a few things he should do:

1. Payments always on time. The customer should always negotiate for favorable payment terms before
the deal is initiated. But once the order is placed, the commitment should be honored. Any problems
arising in this regard should be properly dealt with to maintain the goodwill and benefits to earn.
2. Provide adequate flexibility. The customer should try to give suppliers as much flexibility as possible for
them unless there is a compelling, competitive reason not to do it. Unreasonable demands should be
avoided. This tendency also connects to quality production.
3. Personalize the relationship. The customer should always be in contact with the supplier and visit him
frequently, not necessarily only when it is needed. He may also be invited to attend and give
suggestions in some of their strategy meetings. Methods of improving business may also be discussed.
Sharing of knowledge, opportunities, service benefits, software compatibility etc. would be beneficial
for both.
4. Share information. The customer should be communicative by keeping the suppliers aware of what is
going on in their organization. He may share some of the key strategic information with them.
Frequent and open communications are important in understanding each other’s expectations. All
relationships begin with self.
5. Be a demanding but a valued customer. Being a demanding customer can just be fair. The customer
should state his demands clearly and tell his supplier to hold his agreements. At the same time as a
valued customer he must always cooperate with him to keep up his commitments without
embarrassment. Sharing knowledge, service benefits, media exposure opportunities, software
compatibility, efficiencies etc. would add to enhance relationship.

These essential factors are important for the customers to create and maintain a healthy relationship with the
suppliers.
Customer-Supplier Relationship
An organization spends substantial portion of every dollar on the purchase of raw materials, components, and services. In fact,
60% of cost goods sold are consisted of purchased goods. Therefore, supplier quality can substantially affect the overall cost of a
product or service. One of the keys to obtaining high-quality products and services is for the customer to work with suppliers in a
partnering atmosphere to achieve the same quality level as attained within the organization.

Customers and suppliers have the same goal—to satisfy end user. The better the supplier quality, the better the supplier’s long-
term position, because the customer will have better quality. Because both the customer and suppliers have limited resources,
they must work together as partners to maximize their return on investment.

There have been number of forces that have changed supplier relations. Prior to the 1980s, procurement decisions were typically
based on price, thereby awarding contracts to lowest bidder. As a result, quality and timely delivery were sacrificed. One force,
Deming’s fourth point, addressed this problem. He stated that customers must stop awarding business based on the low bidder
because price has no basis without quality. In addition, he advocated single suppliers for each items to help develop a long-term
relationship of loyalty and trust. These actions will lead to improved products and services.

Another force changing supplier relations was the introduction of the just-in-time (JIT) concept. It calls for raw materials and
components to reach the production operations in small quantities when they are needed and not before. The benefits of JIT is
that inventory-related costs are kept to minimum. Procurement lots are small and delivery is frequent. As a result, the supplier
have many more process setups, thus becoming a JIT organization itself. The supplier must drastically reduce setup time or its cost
will increase. Before there is little or no inventory, the quality incoming material must be very good or the production line will be
shut down. To be successful, JIT requires exceptional quality and reduced setup time.

The practice of continuous process improvement has also caused many suppliers develop partnership with their customers. A
final force is ISO 9000, which is mandated by the major automotive assembly firms. Specifically, first tier and tiers subsequent to
the OEMs must maintain supply chain development through three key factors: zero defects, 100% on-time delivery, and a process
for continuous improvement.

These forces have changed adversarial customer-supplier relationship into mutually beneficial partnerships. Joint efforts improve
quality, reduce costs, and increase market share for both parties.

Dr.Kaoru Ishikawa has suggested 10 principles to ensure quality products and services and eliminate unsatisfactory conditions
between the customer and the supplier:

1. Both customers and the suppliers are fully responsible for the control of quality.
2. Both the customer and supplier should be independent of each other and respect each other’s independence.
3. The customer is responsible for providing the supplier with clear sufficient requirements so that supplier can know
precisely what to produce.
4. Both the customer and the supplier should enter into a non adversarial contract with respect to quality, quantity, price,
delivery method, and terms payments.
5. The supplier is responsible for providing the quality that will satisfy the customer and submitting necessary data upon
customer’s request.
6. Both the customer and the supplier should decide the method to evaluate the quality of the product or service to the
satisfaction of both parties.
7. Both the customer and the supplier should establish in the contract the method by which they can reach an amicable
settlement of any disputes that may arise.
8. Both the customer and the supplier should continually exchange information, sometimes using multifunctional teams, in
order to improve the product or service quality.
9. Both the customer and the supplier should perform business activities such as procurement, production, and inventory
planning, clerical work, and systems so that an amicable and satisfactory relationship is maintained.
10. When dealing with business transactions, both the customer and supplier should always have the best interest of the end
user in mind.

Although most of the principles are common sense, a close scrutiny shows that a true partnering relationship
exists with long-term relationship, where each party preserves their identity and independence.
Chapter 3: The Government and Entrepreneurship

3 main topics:
1. Role of the Government
2. Determinants of Investment
3. Factors of Entrepreneurship

I. The Role of the Government

- Is to promote the welfare of all sectors – producers, consumers, businessmen and the rest of
the society.
- The fundamental function of the government is to serve the best interest of its people.
- Public servants are the one who runs the government. They acquire their salaries through the
tax payments of the people.
 Laissez Faire - is an economic system in which transactions between private parties are
free from government intervention such as regulation, privileges, tariffs, and subsidies.
II. Determinants of Investments
a. Investment is of three types:
(1) Business Fixed Investment (i.e. investment in fixed capital, such as machines, tools),

(2) Residential Investment i.e., investment in building of houses) and

(3) Inventory Investment (i.e. investment in building stocks of goods and raw materials).

- Determinants of Investment:
(1) Expected rate of profits

(2) The rate of interest.

III. Factors of Entrepreneurship

The entrepreneurial key success factors or characteristics of successful entrepreneur that will be presented
here are based on my research before several years in which I have included more than
hundred entrepreneurs.

Now, let’s continue with the main subject of this post.

15 ENTREPRENEURIAL KEY SUCCESS FACTORS

The most critical and most important key success factors that can make an entrepreneur to become a
successful entrepreneur are:

1. Willingness to take an action. This is the first and most important factor for “would be” and current
entrepreneurs. All other entrepreneurial key success factors, are not important if you are person who
afraid to take a real action. Actions are something that can lead you to the success. Without actions,
you can’t expect to become a successful business owner. Sorry, it is a true fact!
2. Entrepreneurial knowledge. Entrepreneurs are persons who must have superior knowledge about
specific business issues for business that they have started. Your knowledge will increase your business
potential energy and in large part will contribute to the success of your company.
 3. Entrepreneurial creativity. You must be a creative person if you want to be enough unique and with the
power of continuous improvement in your business. The creativity will increase your business potential
energy that will bring many possibilities for your company.
4. Entrepreneurial skills. Each entrepreneur and each business will need different entrepreneurial
skills that in some cases can be crucial for the success of their businesses. If you have knowledge, but
you don’t have skills that can be covered only through implementation of what you have learned, you
can’t expect that you are close to the success. As you can see, you will have skills if you take action,
implementing what you have learned.
5. Entrepreneurial intelligence. You must be intelligent to manage all possible situations and solve the
hardest problems that will be the most consistent thing in your business life. Your intelligence will
additionally bring uniqueness to your company because it is something that can’t be copied from others.
6. Patience. You must be patient and ready to continue even you lose the first battle. It is important
because the war is still not finished. This is only the beginning of your journey as an entrepreneur. You
need to understand that your entrepreneurial journey isn’t an easy journey form A to B.
7. Persistence. Persistence is simply a refusal to give up for something, or ability to keep your actions
against your personal feelings that you’re not ready for these actions. Feelings and motivation didn’t
produce results. Тhe action is something that will produce the results you want to achieve. So, remove
your feelings that pulled you back, and with the whole power continue on your journey.
8. Ability for teamwork. Nobody can achieve anything alone so, this is also true for you as an entrepreneur.
You he are not a “superman”. As an entrepreneur, you must be a team player for your own and
your business success.
9. Risk taking, but calculated risk. This is truly one of the most important questions: Are entrepreneurs
taking enough risk? Yes, each business startup is at some level risky. However, more important is how a
successful entrepreneur takes a risk? The word calculated risk is the most appropriate word for this
characteristic. You need to use risk management principles if you want to succeed.
10. Having a self-confidence. Self-confidence is a really important and key success factor for entrepreneurs.
I think that nobody will become an entrepreneur if he doesn’t have self-confidence in himself, especially
related to start and manage his own business.
11. Having enough experience. Sometimes experience is in a category not so required as a factor, but it is
something that will increase your business potential energy. As an entrepreneur, you must employ all
present and previous experience you have in the business that you are building.
12. Great talent. Talent is something inborn in an entrepreneur. But, sometimes talent is something that
can be easily replaced with knowledge and skills.
13. Honesty. Honesty is important in every case. But sometimes honesty, being real, can be the biggest
enemy of an entrepreneur in some complex conditions.
14. Connections. More connection means more possibilities for building a successful business.
15. Luck. Luck is a psychological factor. Some people can say that they aren’t lucky persons. And indeed
there are some “lucky people” who just accidentally found the right place at the right time with the right
idea. However, it is a small percentage and cannot be included as a serious factor for success.

The key success factors on this list are sorted according to their importance to your success as
an entrepreneur. So, the most important key success factor here is your ability to take action.