The Adventures of Lee The SME Owner - 18.
Chapter 18 - The Supplier Review
After tackling the feedback from customers and employees, John and Lee knew the next step was to review the supplier relationships. Lee had been in business for decades, and some of his suppliers had been with him for just as long. In fact, many had become friends over the years, but business is business, and John felt that it was time for a detailed audit of those relationships. Not to initiate a “cleanout,” but to ensure that the long-standing loyalty Lee had shown was still being earned.
John’s approach was methodical. As they sat down one evening over a glass of wine, he laid out the process he had successfully used in manufacturing in the past.
“We’re not looking to upset the apple cart,” John explained, “but it’s important to check in with each supplier to make sure you’re still getting the best value. It’s easy to fall into patterns, especially when you’ve worked with someone for years. But circumstances change—prices go up, quality fluctuates, and new suppliers enter the market. It’s about making sure everything is still aligned with your needs.”
They decided to break the review into a few key areas:
Product or Service Quality: Was Lee getting consistent quality? Were there any recurring issues with certain products that could impact production? Had the supplier been quick to address warranty or defect problems?
Pricing: Were the prices still competitive? Lee didn’t want to undervalue loyalty, but he also didn’t want to be paying more than he should for the same products or services. Was there any room for negotiation, or had prices been steadily increasing without justification?
Support and Responsiveness: How quickly did suppliers respond when something went wrong? Was Lee getting the technical support he needed? When there was an issue with a delivery or a breakdown in communication, were suppliers stepping up or leaving him to deal with the fallout?
Technical Expertise: Were suppliers offering innovations or staying updated with industry trends that could benefit Lee’s business? Or had they become complacent, content with providing the same products without looking for ways to improve?
Alternative Suppliers: Who else was out there in the market? Were there other companies offering better terms, newer products, or more innovative solutions? While Lee wasn’t looking to jump ship, it was worth exploring who might be eager to win some of his business.
The Preferred Supplier Model
As John talked through the criteria, he introduced Lee to a concept he had used in his own business dealings: the Preferred Supplier Model.
“Here’s how it works,” John explained. “You keep a preferred supplier for most of your needs—someone you trust, who provides consistent value. But you also give a second-tier supplier a small portion of the business. This keeps the preferred supplier on their toes because they know there’s competition for your business. If they drop the ball, the second-tier supplier is ready to step up.”
Lee nodded, taking it all in. It made sense. By spreading a small amount of work to a second supplier, he could maintain loyalty to his long-term partners but also ensure they didn’t get complacent. Plus, it gave him options if the preferred supplier ever couldn’t meet his needs.
“The second-tier supplier might not get a huge portion of the work,” John continued, “but they get a consistent stream of business, which can help them grow. And for you, it’s a way to hedge your bets. If one supplier can’t deliver, you’ve already got another lined up.”
The Audit Process
Over the next few weeks, Lee and John started going through the supplier list. It wasn’t just a cold, number-crunching exercise—many of the suppliers were people Lee had known for years. But that didn’t mean they were exempt from scrutiny.
One by one, they evaluated each supplier using the criteria they had established. Here’s how it played out:
Product Quality: Most of Lee’s long-standing suppliers were delivering consistent quality, but there were a few minor issues with one or two. In some cases, the problems had gone unaddressed for too long because the supplier assumed their relationship with Lee would keep them in good standing. Those assumptions were now being challenged.
Pricing: One supplier, who had been with Lee for over 15 years, had slowly raised prices without much notice. When Lee compared their prices to the market, it was clear that they were now charging above average for the same quality of product. This opened the door for a conversation about renegotiating terms or potentially moving a portion of the work to another supplier.
Support: A few suppliers excelled in customer support, jumping in whenever there was an issue, while others were slow to respond. Lee and John noted that this was an area where changes might be needed. Quick and efficient support was critical to Lee’s operations, and any supplier who wasn’t stepping up was flagged for potential replacement.
Technical Expertise: Some suppliers had fallen behind on industry innovations, content to deliver the same products year after year. However, a newer supplier—one who hadn’t yet gotten much business from Lee—had presented some innovative products that could increase production efficiency. They didn’t have the same history with Lee, but they were hungry for more business and had shown a willingness to invest in better solutions.
Outcomes
By the end of the audit, Lee had a clear picture of where his supplier relationships stood:
Preferred Supplier: Several suppliers continued to earn Lee’s business as preferred partners. They provided consistent quality, fair pricing, and strong support. But they also knew now that Lee was watching more closely and that there was competition in the wings.
Second-Tier Supplier: Lee identified a couple of newer suppliers who had shown promise. While they wouldn’t immediately replace his long-term partners, they were given a small, steady stream of work. This helped keep the preferred suppliers motivated and gave the second-tier suppliers a chance to prove themselves.
Negotiations: For a few suppliers who had let prices creep up or who had become complacent in support, Lee opened discussions about improving terms. In some cases, it led to better pricing and a renewed commitment to quality and service.
As Lee and John reviewed the results of the supplier audit, Lee felt a renewed sense of control over his business. He hadn’t shaken up his supplier relationships too drastically, but he had made the necessary adjustments to ensure that every dollar spent was delivering the right value.
John raised his glass. “Well done, Lee. This was about more than just numbers—it was about making sure your business is ready for whatever comes next.”
Lee nodded, satisfied. “Feels good to know we’re in a strong position. It’s easy to get comfortable with the way things are, but now I see how important it is to keep checking in.”
And with that, another piece of the puzzle was in place.