“Our Vendors Don’t Listen to Us”
One of the most common comments we hear from Buying Groups is, “Our vendors don’t listen to us.” Variations include, “They will listen to our members but not to us”, “Our vendors wouldn’t change that for us”, and “Our suppliers barely know we exist.”
Almost universally, Buying Groups have a pessimistic view of how important they are to the vendors that service the group. It doesn’t seem to matter whether it’s a Central Bill group (where the group pays all invoices on behalf of their members) or a Direct Bill group (where members pay vendors themselves), the belief exists that the Buying Group itself has no influence with vendors.
What Do Vendors Think?
Because of this complaint, we’ve been thinking about the supply chain from the vendor’s point of view:
- What do vendors think about Buying Groups?
- What value can Buying Groups provide suppliers?
- How can a Buying Group gain more influence over their suppliers?
- Would unilaterally focusing on what your group can do for your vendors cause vendors to look at what they can do for the group?
With these thoughts in mind, we recently spoke with the VP of Sales of a large national vendor that supplied product to 8 different Buying Groups. When we asked them what Buying Groups can do to help them as a supplier, they brought up four areas:
“Treat preferred vendors better than non-preferred vendors”
Preferred vendors have demonstrated their support to your group through group-negotiated pricing and rebates, by participating in your shows, and helping out with other promotions as needed. In exchange for this, are you doing everything you can to make sure your members are buying from your preferred vendors?
Buying outside of the group is bad for everyone, but it is particularly hard on a loyal vendor who has put money on the line to gain preferred status. Getting just one more member to start buying from a preferred vendor can make a big difference.
Likewise, don’t offer benefits to non-preferred vendors that should only be given to preferred vendors.
“Make sure buying shows consistently benefit vendors”
Shows and conferences can be expensive for vendors to attend. In addition to the fees, there are travel costs, which are even higher if they have to bring product to display.
Are your suppliers getting enough orders at these events to justify their participation?
Don’t assume that if you haven’t heard any complaints, that your suppliers are happy. They are reluctant to offer criticism, no matter how constructive. Ask them very straightforward questions: Is it worthwhile for you to attend our events? Are you connecting with the right people? Would you prefer national events or regional events? Is there a different format that would be better?
“Simplify the rebate process”
Suppliers have to provide groups with after-the-fact reporting on member purchases in order to calculate rebates. This is typically a very manual, time consuming process. Finding ways to streamline this process will help make it easier for the supplier to do business with you.
Improving the rebate reporting process may also allow vendors to offer more creative (that is, more beneficial) rebate programs. A supplier views rebate programs as an incentive program to get customers to buy the products the supplier most wants to sell.
For example, think about a high-margin product or part that needs to be replenished regularly. Suppliers would gladly provide higher rebates for these types of items if they could clearly see the group’s total historical purchases and if doing so did not create additional administrative hassles for the supplier. We’ve seen this occur within the buying groups that use our rebate management software so we know it works. Rebates don’t have to be the same amount across all product lines.
“Give us data on your members’ purchases from us”
The structure of a Buying Group with independent members usually does not fit nicely with vendors’ reporting tools. They can eventually pull data on what your members are spending with them, but they would love it if you made their job easier for them. If vendors had clear numbers about the Group’s total purchases from them, they would be better able to see the value of working with the Group and will be better able to run Group-specific promotions. Put systems in place to get this data, and make it your job to let your vendors know exactly what your members are buying from them.
Spend some time thinking about your vendors from their perspective. Figure out what is important to them and how your group can help them. Be a better business partner with your preferred vendors, and you will find that they start to reciprocate. You may find that you have a lot more pull with your vendors than you might think.
LBMX offers a business-to-business marketplace platform, helping independent businesses, their Buying Groups, and suppliers buy better and sell more. Its Private Group Marketplace for Groups has transformed billing and ordering, rebate management, real-time analytics, e-commerce and product information management across the building materials, HVAC, plumbing, sporting goods, industrial supply, manufacturing, and agricultural industries. Its LBMX Supply Cloud platform allows suppliers to look at their industrial distribution customers through one lens, offering full EDI, PIM, Analytics and Payments.