Evolving from supplier to strategic partner
This month, MHW is highlighting strategic partnerships in the world of material handling. This is a subject worthy of consideration in our marketplace. It’s no secret that customer expectations and demands are growing. As dealers, we can no longer view ourselves as simply equipment suppliers. Customers want more. Sometimes a lot more.
Our efforts to build and maintain our value proposition require us to look outside our own capabilities and core competencies. We just can’t be all things to all people. Forging a partnership with those who can complement and augment our value is an important tool in widening our market appeal. The growth and expansion of strategic partnerships are self-evident. Look no further than the airline industry. It takes a monumental capital expenditure for a domestic air carrier to break into a new market and develop routes and infrastructure on another continent. It’s much more profitable for them to partner with airlines that already operate in these markets, and link the regional airlines capabilities to the value offering of the domestic carrier. That is where the United Airlines “Star Alliance,” and American Airlines “Oneworld” networks were born. For us to continue to build value for our customers, we need to consider similar alliances.
We once had a customer who depended on us for everything…and I mean EVERYTHING! As demands grew the customer constrained us to add products and services to our offering that were far outside the limits of traditional material handling distributors. From sealing concrete floors, to installing electrical circuits, our reach soon exceeded our grasp. These are the times when strategic partnerships start to make sense.
Fully leveraging the true power of strategic partnerships requires us to identify specific customer needs that we cannot easily or profitably satisfy. We then look for the solutions to these issues by selecting partner/suppliers (that are not directly in our industry or market), and link the targeted advantages these partners offer to our own customer proposals.
I actually embrace these changes. For the longest time, the dealer value proposition was limited to machinery features and capabilities, and service response. A strategic partnership widens the avenues for customer satisfaction, and gives us more opportunities to create lasting and provable value. Many times, your supplier is better educated, and better equipped, to handle the work. They most likely have certifications, and the insurance coverage required for the task.
What you provide to them is access to business that would otherwise be off their radar. In turn, they promote your products and services to their core customer base. This is a win-win environment that, if done properly, creates lasting value. The most exciting thing about evolving from a lone supplier to a strategic partner is that it is most always a win-win proposition. Both sides gain from the interaction, and customers of both participants are served at a higher level.
All that being said, not every partnership is a match made in heaven. Hence the word “strategic.” Before you choose to hitch your boxcar to someone else’s locomotive, let’s make sure we do a safety inspection, and agree on the destination!
In planning strategic partnerships with vendors, it’s important to consider the following:
- Is the work the partner does consistent with the dealerships quality standards?
Do they have the right tools, training, manpower and expertise to really handle the job? The only thing worse than apologizing for getting it wrong, is apologizing for someone ELSE! - Is this something that you should actually be “insourcing” in order to increase your margins and add value to your offering?
A few years ago, we did an audit of our vendors to see where we might be able to improve our services, and increase our margins. At that time, we were farming out all our battery service and repair to a local battery supplier. Total costs for the year were staggering! We made a minimal markup on these services. We investigated what would be required for our own people to take on this work, and found that the investment required was reasonable. We bought the tools, trained our people and from that point forward we handled these tasks in-house. This gave us control of the process, pricing and the end product. There is no reason to forge a strategic partnership when the capabilities of your own staff are sufficient to satisfy the customer. - How can the relationship be leveraged to bring in NEW business?
Having a qualified and capable strategic partner may open up opportunities that the dealership would otherwise ignore. Since the relationship has been formed, it’s important to now exploit all of the opportunities that would otherwise be dismissed. Every strategic partnership must have GOALS and OBJECTIVES. This is important for both parties to win. If you are only going to call upon your partner when a customer demands it, the partnership will be weak, and most likely short lived. Start the partnership with shared goals, sales objectives, target accounts, salesman incentives and calendared assessment meetings to measure progress. - Is the relationship exclusive? What protections can be included to prevent either partner from engaging in direct sales?
Once the supplier sees a new crop to be harvested, he may be tempted to seek out new fields to expand his successes. This is why it’s important to set those goals! You don’t need to be sharing the benefits of your new partnership with your competitor, or finding that the partner you have so carefully chosen decided that he didn’t need you after all. Get an agreement of exclusivity and a commitment not to participate in direct sales early in the process. If both parties make good on the mutual commitments, there should be no reason for anyone to try and find greener pastures.
The areas in which strategic partnerships can be leveraged are wide and varied. Many times, deciding where a partnership is needed will depend on the dealerships current capabilities, manpower, marketplace and expertise. Below is a sample list of some of the possible areas where we can use strategic partnerships to widen our customer relationships.
- Electrical work
- Plumbing work
- Rack design and engineering
- Rack installation
- Major battery repair
- Battery salvage and recycling
- Floor coverings (sealers and epoxy)
- Waste disposal (balers, compactors)
- Roll up doors (and service)
- DOT compliant trailer repair
- OTR Tires
- Hardware sales
- Lighting
These are just a few examples. Look at everything our customers’ need that we don’t directly provide. Is there a way for us to participate in satisfying those requirements, while not unduly involving ourselves, by partnering with somebody that is actually “IN” that business, and is looking for access to new opportunities?
I want to share a true-to-life example of a recent successful partnership that a dealership used to enhance their value to their customers. The dealership is located in the California Central Valley, where agriculture is the mainstay of the economy. Many of the dealerships clients were farmers, ranchers or custom harvesting operations. Most all of these customers had shops on their property where the equipment was stored, serviced and repaired. The dealership’s CSR crew would call on these customers regularly and sell ignition parts, belts, hoses, filters, bearings, chain and other components.
Investigating what OTHER opportunities existed in these facilities, they noticed something common in every shop they entered. All of them had hardware bins. These customers normally purchased their hardware as they needed it. They would routinely go to NAPA or Home Depot and refill the bins periodically. That was the goal anyway. In actuality, most of the hardware areas in these shops were a mess. There was little if any attention given to hardware types, sizes or grades. Consequently, the technicians wasted an enormous amount of time trying find what they needed, only to get in their truck and go back to NAPA to repurchase what they probably already owned.
This dealer was NOT in the hardware business, and didn’t want to be. But, they did want to satisfy their customers and provide solutions to what seemed to be a common problem. In response to those needs the dealer partnered with a hardware supplier that was willing to go into these shops, install new bins, organize the existing inventory and service the bins periodically (based on usage) so that the customer never again had to search in vain or burn gas and time buying hardware.
The arrangement provided a minimum 15% margin to the dealer on all products sold in these facilities, and all the dealer had to do was provide the lead and bill the customer. The hardware supplier did all of the footwork, delivery and organization. This supplier had been spending their sales efforts on large industrial and manufacturing customers, and had no idea how to access these smaller agricultural shops. The supplier got the access to the business they wanted. The dealership got a reasonable markup and the ability to satisfy customers without having to get into the hardware business. Win-Win.
Something we are seeing more and more, is the desire for customers to limit their supplier base. The more products and services that they can obtain from one supplier, the lower their overall administrative costs will be. Strategic partnerships allow us to meet that objective. There are always more potential sales possibilities inside our current customer locations than we realize. The power of strategic partnerships helps to unlock these opportunities and expand our value.
Dave Baiocchi is the president of Resonant Dealer Services LLC. He has spent 33 years in the equipment business as a sales manager, aftermarket director and dealer principal. Dave now consults with dealerships nationwide to establish and enhance best practices, especially in the area of aftermarket development and performance. E-mail [email protected] to contact Dave.
