We occasionally see the term Vendors used instead of suppliers. I find Vendor is a confusing term. “Vendor” is primarily used in the USA and within software packages such as SAP and JD Edwards. The term “Vendor” reminds me of the ongoing development of the “Supply Chain Management” (SCM) concept.

Large scale software packages such as SAP & JD Edwards (known as Enterprise Resource Planning or ERP packages) use the SCM model extensively to seamlessly link the purchasing of raw materials and/or services, value adding and then selling to a customer. In that sense, the process can certainly be seen as a supply chain.

I prefer to use the term suppliers as it clearly reflects and defines an integral part of any business. In my business experience, I have worked with suppliers to improve my business’s overall value to customers with the goal of making us (my business in partnership with my suppliers) an integral part of my customers business. This has been through enhanced product presentation, product development, better distribution options, better supply performance, better rental facilities, more favourable trading terms and cost relief.

I have also seen the other side of the Supplier/Customer relationship where the ultimatum to reduce costs or lose the business was made. With the prospect of a loss-making product, I did what any sane minded person would do. Put up my price. This short-lived margin increase allowed me to exit that market and focus on good margin products and alternative market opportunities. This business still focuses on customers that value them as a partner.

Too often I have heard of the poor treatment of suppliers. This generally relates to organisations that only see suppliers as the best opportunity to cut costs, using pressure around tenure of supply. These gains, when eventually achieved, are either passed on to the end-using customer or as an exercise to increasing margins. A quick scan of the literature confirms that in many cases the prevailing view about suppliers is an opportunity for cost reductions. I think this is a very short-term assessment of what suppliers offer and comes from organisations that see their competitive advantage as only through pricing. In fact, if supplier selection is undertaken seriously, the supplier/customer relationship can offer much more than cost relief.

The important message here is that we should form good partnerships with our customers and our suppliers. Without our customers we have no business. Similarly, without our suppliers, our businesses do not exist. It is our suppliers that provide us with the products/services that value is added too. Suppliers help us with innovation and they also have the power to help with cost relief. We are all suppliers and customers and we should all treat our suppliers, as we would like to be treated by our customers. We also need to ensure the supplier’s businesses are viable so that we can continue to supply our customers with innovative and appealing products & services that the market needs, wants and can afford.