Make your suppliers work harder for you

Supplier recognition programs are a great way to get suppliers to compete for your attention.

by Richard Vurva

Do you want to know the secret to getting supplier reps to work harder for your company? Establish a supplier recognition program. Done properly, recognition programs can help cement the relationship between channel partners and get your people and factory reps to focus on important activities.

Distributors that run successful recognition programs and manufacturers that have won supplier of the year awards have discovered that such efforts benefit channel partners in several ways.

“It strengthens the relationship between the manufacturer and the distributor,” says Rich Poole, vice president of distributor marketing for brush and abrasives manufacturer Weiler Corporation. He says winning an award strengthens the bond between senior management at both companies and results in closer and more frequent communication.

Unlike award programs that are nothing more than popularity contests, a properly designed program — that recognizes companies for accurate shipping and invoices, cost savings and other value-adding activities — can have a direct bearing on a distributor’s profitability.

“Today, companies are being recognized for providing supply chain cost reductions and supply chain value-added services,” he says. “That’s a neat thing. You don’t have to be the biggest guy.  You don’t have to have the cheapest price. You can be someone who is out there continually solving problems and get recognized for it.”

Get competitive juices flowing
You could take the lazy way out and give an award to your largest supplier, then announce it to the world after the fact. A better approach would be to announce the goals and time frame for the program to your key suppliers ahead of time. When properly promoted and encouraged, it creates competition and increases the likelihood that all participants will improve their performance and focus on specific activities. 

That’s what Fuchs Machinery in Omaha, Neb., discovered when it developed a supplier of the year award two years ago. The company invites eight to 10 key suppliers to participate in semi-annual planning sessions with Fuchs management and territory managers. They instruct suppliers to develop comprehensive plans not only to boost sales, but to show documented cost savings to customers. Each year, the supplier that does the best job of following its plan wins the supplier of the year award.

“We don’t base it strictly on sales increases. We base it on the overall effectiveness and how well the plan was worked between our territory managers and the factory sales guy,” says cutting tools application specialist Dennis LaForge. At the end of the year, LaForge and Bill Kiefer, manager of industrial products, pick the winner based on criteria such as whether the supplier made the sales calls they said they would make and ran the tests they said they would run during the year.

To generate goodwill on a broader scale, don’t limit the prize to a single supplier of the year. Weiler’s Poole suggests distributors should segment their suppliers and pass out awards in more than one category. That way, cutting tool suppliers won’t be competing against safety suppliers for example. Plus, it promotes competition within specific product groups, increasing the likelihood of supplier participation.

One of the biggest benefits of a well-run supplier recognition program is that it crystallizes for the supplier what’s important to the distributor.

“Our goal is to monitor and measure the ongoing activity of each line we represent, to move it increasingly forward every year. A recognition program also sends a message to the supplier community that these are the criteria that are important to us, these are things we’re going to measure and that we need you to work on,” says David Mayer, vice president of marketing for Kaman Industrial Technologies. 

Kaman has not given out supplier awards in the past, but Mayer is interested in developing a program. He believes it’s a good way to motivate suppliers.

“Having a supplier award provides a level of recognition to those suppliers that are working the hardest — and most effectively — with our branches, performing value-added activities,” he says.  “I want to recognize the guys that are doing the best job but also let everyone else know that there’s someone out there doing a better job than they are. It tends to raise the bar a little bit.”

Start with a bang
To get the biggest bang for your buck, kick off the program with a luncheon attended by your key suppliers. Explain the goals of the program and your criteria for selecting a winner. If that’s not feasible, send a certified letter to each participant announcing the program or, better yet, have your CEO phone your supplier CEOs to personally request their participation.

Promote the program throughout the year. Remind suppliers that their actions not only increase their chances of winning the award but help boost their sales too. Prepare and distribute periodic promotional pieces and give status reports as often as possible. 

Suppliers that strive to receive Grainger’s prestigious CFQ1 designation, the Customer Focused Quality 1 award, know exactly how they’re being measured.

“We have a very robust and proactive measurement program for our suppliers,” says Fred Loepp, vice president of product management. 

Grainger measures suppliers on six criteria, including supplier economic earnings, which is a financial performance measure, order fulfillment, total cost of procurement, the cost of poor quality, customer satisfaction and management commitment.

“Our measurement criteria are exacting,” says Loepp. “To win the CFQ1 award is a tough thing to do and the industry recognizes that, so suppliers try hard to win this award.”

Getting status reports is crucial, says Mike Fallon, vice president of sales for hand tool manufacturer Cooper Tools. “Vendor report cards that come out monthly or quarterly are crucial and probably the strongest form of distributor recognition we can get,” he says.

The more specific the report card, the better. Fallon says some distributors regularly report how his company fares compared to competitors in terms of making end-user sales calls, offering training seminars, documented cost savings, line conversions at integrated supply sites and other activities.

“Recognition programs now are far more numeric than they have been in the past, which means we’re being graded on specific performance,” says Fallon. “Those are the recognition programs that really mean something.”

For best results, have a good strategy and clearly defined rules.  Without formal guidelines that tell suppliers the type of behavior that you plan to recognize, you’ll get lackluster participation and haphazard results.

Engman-Taylor Company in Menomonee Falls, Wis., developed a comprehensive, 51-point formalized supplier evaluation program.  Everyone in the company that touches a supplier rates that company on a variety of criteria, ranging from on-time delivery, product quality, accessibility of its customer service personnel and effectiveness of its field salespeople. The results are totaled and converted to a percentage.

“We put together a bar chart that shows how everyone scores, but we don’t show any names,” says president Rick Star. “Then we give each supplier their own version of the chart, which identifies their position, but anonymously illustrates the other suppliers. It allows each supplier to see exactly where they stand, while protecting the confidentiality of the other suppliers.”

Star says the program began as a tool to educate Engman-Taylor employees about the best suppliers to work with. 

“Perhaps an even larger benefit has been on the customer side of things,” he says. “When we take that data to our customers, it’s a real eye-opener for them. They have confidence about why we recommend this supplier instead of that one.”

End with flair
Host a banquet or award ceremony, send congratulatory letters to the winner and press releases to local and trade media outlets. Suppliers will be motivated to do well next year if this year’s recognition event is memorable.

Grainger hosts an all-day supplier recognition event each year.  Now in its 15th year, the event includes speeches from top Grainger executives and an awards ceremony.

Fuchs Machinery hands out its award at one of its semi-annual meetings in the presence of other suppliers. It gives a plaque to the local salesperson, the regional sales manager and to the corporate office.

“A regional manager from a company that didn’t win the award wants to win a plaque real bad next year,” says Kiefer. “I’m sure he’s going to do more follow-up with his salesman this year.”

Don’t forget to post the winner’s name on your Web site and include it in other marketing materials. Your customers need to know that you align yourself with best-in-class suppliers. 

This is the winner’s moment in the spotlight, so milk it for all you can. The award can help your supplier develop new business and create goodwill. 

This article originally appeared in the May/June 2002 issue of Progressive Distributor. Copyright 2002.

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