One of the building blocks that will move a company toward a well-oiled supply chain is collaboration with its customers. This crucial step pays a valuable dividend: loyal customers with bigger profit margins. I witnessed a great example of this last week when I visited GMB North America, a New Jersey-based company that provides replacement parts for the auto industry.

During my visit, I met with senior warehouse manager Stella Kaplansky. This year, Kaplansky is making it her business to visit with the managers in the receiving departments of her company's biggest customers. Her goal: to bring value, improve customer relations and increase profit margin at these accounts by offering solutions to make her customers' lives easier.

A Simple Strategy

Kaplansky gave me an example of the true effectiveness of this simple strategy. She described a recent visit to one of her customers, during which she wanted to understand exactly what the company was doing with GMB's product. She explained that once she comprehends this aspect of a scenario, she is sometimes able to offer a better way for customers to order the items they need and capitalize on efficiencies and savings.

In this case, the customer told Kaplansky that they use the product in a kit that they resell. She asked them to specifically demonstrate what is done with GMB's product when it is received. In short, the customer explained that when they unload the product, they unpack it, recycle the corrugated material, place the product into their kits and then repackage the product with their own box. After that, their product is ready to be sold.

Right away, Kaplansky saw the redundancy and was able to talk through a much more efficient process. Since she runs her own warehouse and knows exactly what she is capable of doing, Kaplansky was able to develop an action plan that basically consisted of shipping unpacked product in a dedicated weekly truck (in bulk).

Her ability to adapt her operation to her customers' needs provided huge benefits for GMB's customer and GMB itself. "Both companies are now saving on packing time, as well as the cost of boxes, pallets, shrink wrapping, palletizing and transportation," Kaplansky explains. "There are now fewer pallets, a decreased cost of labor to unpack the items, and lower recycling costs and energy bills."

The new strategy also improved lead times by 48 hours; the company now has the ability to ship the same day or next day. "I offered them solutions for improvements and a chance to increase profit," she says.

Kaplansky knows that collaborating with customers is vital to the profitability of her company. She also realizes that collaboration is a key to making her more of a strategic partner to her customers, rather than just another supplier. In this example, with one short face-to-face meeting, Kaplansky was able to deepen her relationship with her customer and cut costs on both sides.

Potential Benefits

Companies that embrace the idea of collaboration are well on their way to out-performing their competition. Suppliers whose supply chains intertwine with their customers' operations bring so much value that the price of the product becomes a smaller priority. These customers are usually ones who won't wince when it is rate increase time.

Often, when an efficiency is created for one customer, the same process can be valuable to others. It is usually easy to duplicate, so it makes sense to include it as part of the sales pitch. In addition, larger, more powerful, and lower-priced suppliers are sometimes too slow-moving to adapt to customers' needs. Collaboration provides a great opportunity for smaller, more agile companies to gain market share, even if they are a higher cost option for the customer.

Links

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