A Hidden Path to Prosperity
The importance of a lucrative customer to vendor relationship.
One of our owners writes “I’ve been on the supplier side of business relationships for well over twenty years. As such, I’ve been asked a lot lately about what separates Full Scale from the competition. This question has always been a stock answer from my core principle “customer service and client relationships”, but in a recent happening with a key account, I was reminded about the value placed on customer service in the Cannabis Industry, as it pertains to the “ancillary” vendors.
For a lot of us on the vendor side, that are making their living and running their business supplying Cannabis companies, it is now common knowledge that if you aren’t the cheapest, you aren’t getting the business. Companies like mine that survive on already minimal margins are having to get into price wars with each other to retain client accounts. This can be frustrating at times, and this article is about the long term effects of this thinking, and as vendors to Cannabis Industry, how this will eventually be worse for the “Industry” than it will be for suppliers, and how Canna-businesses can ultimately achieve the best price, service, and quality from your vendors in the long term.
From a supplier’s side, there is a massive effort and investment to offer services and products at a competitive cost, no matter what that service or product is. For the focus of this article, I will stick to what I know, and that is packaging and customization, but this same scenario can be applied to all ancillary companies.
You as a “Canna-business” may not even realize that you are doing it, and some of you already know this to be true, but you are not placing enough emphasis on the RELATIONSHIP between you and your suppliers.
A relationship means there is give and take, and more commonly, I see a lot of take and no give.
For instance; In a recent happening with this “key account” there is a piece of new business that we had been discussing for weeks. Involving our investment into new equipment as the supplier, including additional staffing and investment into materials to support my client’s demand and supply chain needs. All good, we’re happy to do this type of thing as suppliers in the industry, as we value the relationship and will invest resources to support the growth.
This particular client has many layers and as an agency many things we do for them throughout the year. On many occasions, our knowledge and efforts have saved this customer noticeable amounts of money. When the ask is big, and the timelines are impossible, we have made sacrifices to get it done on time; including working weekends, late nights, holidays, and fronting the funds for certain projects to shave time off of the turnaround.
This new piece of business that we had been discussing; going back and forth on price here and there, ultimately had me putting my faith and trust into the relationship and moving forward on my end to make sure I am prepared for when the first order comes in. We as the supplier had a fair price, far more competitive than most could offer, and then the communication seemed to take a little bit longer than usual.
No worries, Cannabis is crazy like that and we understand…
Now it’s been a week and a half, and questions like “Hi customer, can you give me an idea of when you are going to start this project so I can staff and plan accordingly” are going unanswered.
Now, I’m getting a little frustrated. Communication is key.
We’ve got a price established, we’ve got the order of inventory shipped and warehoused, and we’re ready to go! But now all of a sudden, the communication has gotten short with a bit of misdirection on the replies…
Finally, to understand the situation better, I asked, “What’s going on?”
The response we received: “We’ve decided to go with another vendor because your price is not a cost-savings to us”. (Not more expensive… just not a cost-savings).
I reply with, “Well then let me know where I need to be with regard to price, so we can move forward?” (At this point I am already a bit disgruntled, knowing all of the levels of the business I save them money on and having established a six-year relationship I begin asking myself “Why do I need to be cheaper? I have superior service, and I’m not more expensive than the competitor’s quote?”.
But for the sake of protecting my investment up to this point, now I need the business! So I press back with the previous question; “Where do I need to be?”.
The client responded with “I am not willing to share that information. When I want a quote, I need your best price from the beginning”.
(Yes, some suppliers are willing to drop their price one time to get a new account or client. *This doesn’t last, as eventually, that supplier will need to make a profit. It’s called “Cost of Customer Acquisition”).
So, now I’m not getting the business…
I realized something crucial that I thought was in the past (like how it was in the industry in 2014); this customer does not value the relationship we have.
How does this affect me and my company?
Well, I can bring in other accounts to build out sales for this equipment to produce, and the stocked inventory can be sold to other customers… yes, it is disheartening that equal value placed on the business relationship is not there, but we will survive.
What does this do for that client?
Now, going forward when they need re-orders of items that we possess in a hurry, they will not get it at the same price as before. The same turn-around time is not a priority anymore. When they are in a pinch and need savings (Which let’s face it, in this industry happens daily), I will not be there to save them. All the other benefits that this relationship had on their side has now changed. There is no more status quo.
For this particular customer, that could result in costing four times more than before! Because when they told me (based on actions) that I am just another vendor to them, then that makes them just another customer to me. Why should we care now?
Now, my focus is on the next client that my company can put the effort into, to help nurture their growth and hopefully this client places more value on the relationship.
The lesson here is that your suppliers and vendors that help you, deserve the same back, or else they will not be there when you need them. I know this is a common theme for ancillary suppliers when a competitor markets “Show us your invoice and we’ll beat it by 5%”.
If it is worth losing a partner and support system to save 5% off, then you are going down the path that will eventually lead to you relying on the discount clearance company that doesn’t care about you. What happens when that discounted, faceless supplier doesn’t have what you need? Do you think that vendor you left for 5% savings is going to care what happens to you? How much time are you staffing for, or willing to do yourself to save 5%? What does that cost analysis look like?
True ancillary companies to the cannabis industry have a lot on the line also. I’ve had bank accounts shut down just like you. Just because we “don’t touch the plant”, does not mean we don’t assume risk by supplying you.
The benefit of having partners as suppliers in a mutually beneficial relationship with you is that we will be there when you need us.
Save 5% now, but that may cost you much later on.
Ask that temporary discount supplier for leniency on credit terms?
What happens if you have a cash-flow pinch, but still need the supplies? Your relationship with your supplier could save you, or sink you there.
Before you leave your vendor in search for greener pastures, truly ask yourself “Have I done what I can do to hold up my side of the relationship”.
Eight times out of ten, that vendor has given you a path to the promised land of vendor relationship bliss, and you didn’t take it.
Consider the whole picture of what that vendor does to help you. They may be a bit more expensive in one area, but savings to you on another. If that is the case, stick with that vendor and eventually they will find ways to save money on the item they are more expensive on. The consistent and regular business from you to your supplier, enables them to have confidence in re-investing into their offerings to you. Ultimately, getting you to where you want to be in terms of price. Jumping around from supplier to supplier to save pennies here and there does nothing for you in the long term, because eventually you will cycle through every supplier in that space, and when you re-start the process you will find those same suppliers not as willing to bend backward for you.
Here are some pointers from an “Ancillary Vendors” standpoint, to get on the right track with your suppliers and to build a mutually beneficial relationship.
- Do not start a relationship demanding credit terms. Instead, ask “What do we have to do to eventually receive credit terms?”. Whatever terms you are given, treat those terms seriously. Credit terms are just that, credit. If you violate those terms, you no longer have credit. Do not make light of this agreement, your supplier surely does not.
- Give your supplier first right of refusal on projects that are within their scope of work or on the fringe. This may mean sharing a budget you have in mind, and asking your supplier what it will take to get there. There may be a compromise somewhere between actual costs, and your budget. As opposed to presenting the project out for a quote, asking your vendor to quote it a hundred different ways and spend a lot of valuable time in estimating, just for you to say at the end “That’s too much we’ll go a different direction”. Transparency will work to your benefit here. If your ask is unreasonable, at least your supplier didn’t waste a bunch of time on it.
- Refrain from the first question on purchasing an item to be “What’s your minimum?”. The answer is always ZERO. Zero is the minimum because you don’t have to buy it at all if you don’t want it. Try and be specific about what your monthly / weekly / annual numbers or projections are. This will give your vendor the full picture, and then they can most likely offer some solutions on how to get what you want to be accomplished. I.e. Vendors take that questions like this; “I don’t have the money to do this project, but I want you to waste your time on it”. By explaining your need you create a collaborative effort for your vendor to help you achieve your goal.
- There is Fast, Cheap, or Quality. Almost no supplier of anything can do all three. If you cannot be patient, understand you will be paying more. If you want the most inexpensive offering, it will not be done as quickly as you want it. If you want the best, it will not be the cheapest. Out of those three, pick two; Fast and Quality = not cheap, Cheap and Fast = not quality, or Cheap and Quality = not fast. Good work isn’t cheap, and cheap work isn’t good. Suppliers need to make money on what they are selling, or they will not be around. Asking them for their time without a profit for them is unrealistic.
- Communication is key; however, communication is reciprocated to the amount it is given. Being proactive in your conversations with suppliers will help you understand their business. The more you understand their business, the more you will know where you can push and where you can’t.
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