The search for greater efficiency and profitability creates a new challenge for industrial and service companies.
It is no longer enough to be efficient yourself, cost overruns in suppliers and other members of the value chain can be the cause of significant losses in some companies. Supplier development techniques have been applied for a long time but in highly competitive scenarios that is no longer enough, and Integral Relationship Marketing is imposed as an alternative.
In the modern era, even large companies depend on suppliers, distribution channels, financial institutions, and even government entities for their activity. Value chains are increasingly complex and have more and more critical members (who can significantly affect the business).
In large companies, the operation and purchasing areas resort to complex SCM (Supplier Management) tools in addition to training plans and information exchange with third parties. The sales and marketing sectors use CRM, customer service tools, while on the other hand the financial and administrative sector makes great presentations to banks and government entities. These actions are seldom coordinated or have a common purpose.
The current trend is to coordinate all these actions to optimize the use of resources and more easily achieve the desired objective; profitable, sustainable and fluid growth. In response to this trend, at PAC we developed a tool that we call Comprehensive Relationship Marketing, since its objective is to link the entire value chain in an efficient and coordinated way with a common goal, to satisfy the customer.
Disadvantage of watertight businesses.
Nowadays, the most traditional method of relationships between companies in the Value Chain (CV) consists of negotiations on product or service specifications, prices, financing and delivery dates; followed by an activation of purchases and compliance control.
In general, in negotiations each party tries to obtain the best result from their point of view, which leaves the other party in an uncomfortable and adjusted position. Many suppliers neglect quality and delivery times in an effort to "comply" within the narrow range imposed by buyers, problems that are transferred upstream.
This turns into a daily "fight" with suppliers. In the medium term, the company will have to invest more resources in quality control and activation / monitoring of purchases or suffer the over-cost of deliveries out of time or specifications. Another drawback is the high turnover of suppliers, with a high cost of development and acquisition.
In some cases this is repeated in the distribution chain, where the merchandise is delivered out of time or damaged, with the consequent cost of replacement and loss of image and customers.
For many companies, access to financial resources is difficult or almost impossible. The requirements and analysis systems of financial entities do not correspond to the reality or the business concept of many companies, making it difficult to access credit.
In some medium and large companies the lack of coordination can be seen in their very structures. The administration, operations and commercial areas are managed as independent fiefdoms with different interests, unconsciously bastardizing the other's work.
These external noises and in the business structure also affect the work environment and the human resources of the company. Some of its consequences are a lack of incentive and high employee turnover, which translates into lower performance and higher cost of hiring and training.
Benefits of Comprehensive Relationship Marketing (MRI)
The MRI combines Strategic Planning, Marketing and Business Analysis techniques to generate fluid and profitable relationships in the value chain. In the same way that one considers and attends to a partner, one must attend to the other members of the chain, since strategically they are the partners of the company in the fulfillment of its business objective.
The first results of the MRI applied to suppliers are in the areas of costs and production and delivery times. A harmonious flow of material and services is also achieved and a strong impulse to the development of continuous improvements within the value chain. This translates into considerable economic and financial savings, especially for companies with difficult access to credit, which achieve a significant reduction in working capital.
The improvement in relations allows a more strategic action of the members of the CV. This facilitates the development of new products and services, the reduction of duplication of tasks, the continuous improvement of quality and costs, access to external markets and the development of competitive advantages that are very difficult to replicate.
Improving relations with distribution channels also generates a very valuable source of information. This allows collecting data on trends and market needs, as well as actions and strategies of the competition.
Cases
These problems are common in Argentine industry, and sometimes short-term problems such as lack of financial resources do not allow executives to see them. These being perhaps the cause of their lack of resources.
In one case, the company prioritized price in its relationship with its suppliers. It also communicated its material requirements within days of the production date. This generated delays in deliveries that were solved with safety stock or caused stops in the production line. All this meant extra costs $$$$$ that nobody related to the intention of reducing the cost of raw material by a few pesos. A change in strategy made it possible to capitalize these high costs in exchange for a session on price and an improvement in planning, incorporating suppliers into it.
In another case, a supply chain analysis uncovered hidden costs. Medium-term planning made it possible to coordinate several shipments abroad, considerably reducing the cost of transportation. Several duplicate functions were also discovered that were avoided with simple coordination, which generated significant savings.
In services the cost reduction can be even greater. In the case of a bank, the time to issue a card could be reduced by 63% just by coordinating and encouraging all the parties involved.
In many of these cases where the profitability of the business was less than 10% of the sale, the cost reductions provided considerable increases to their income. It should be noted that many of these improvements do not require an extra cost, just a different way of managing the business.
conclusion
The highly competitive and changing market in which we live requires strategies that allow high efficiency in cost and quality. In addition, great flexibility becomes necessary, allowing it to adapt to the fluctuating needs of customers. An efficient internal and external relational strategy facilitates this level of competitive advantage.
Imagine what it would be like to work in a company where the work flow is harmonious and everyone is pushing in the same direction. This may be a utopian situation, but if we at least managed to get 50% of the operations to comply with this mandate, profitability would be considerably increased and the work environment would improve significantly.
It should be noted that, as in personal relationships, relationships between companies must be built with sincerity and maintained through a genuine and continuous interest in the other.
