How supplier relations work. Success & failure is based on how you source your parts.

Posted Saturday, April 26, 2014

Good supplier relations help create success.

Early on, I wasn’t working with a lot of money, nor with a known reputation. Sure, I had a reputation from repairing studio gear, but that doesn’t translate over into what I was trying to do in this business. What gave me my competitive edge early on were my parts vendors.

Many legitimate repair shops have no vendor relationships.

Take advantage of this.

It was helpful when I realized early on that “legitimate” competition had no supply chain. During my exit-interview with my customers(which, btw, you should always conduct, more on this in the future), I heard my competitor’s failings over and over again. “I was going to use XYZ repair, but they didn’t have the part in stock.” Or, “I was going to use PLM computers but when they got the part in it was bad and I couldn’t wait anymore.”

Instant service creates legitimacy in the mind of your customer.

If you can offer service in 20 minutes in front of a customer, you are legitimate. Forget about the fact that you work out of a park instead of a store, forget that your idea of a receptionist is your bluetooth headset, forget about having a nice location. All those things make the other guy’s operation seem more legitimate. However, if you can do in 20 minutes what would take them a week – you’ll always win.

I based my business around the shortcomings of my “more legitimate” competition. I didn’t have a client base or a name built for myself, so I had to be better. One of the ways I created legitimacy for myself was through my parts vendors. I always had a proper supply chain. I knew my vendors, and they knew me. I kept quality stock and they cut me deals for being a regular. When something went wrong, I was always able to receive swift replacements.

Fair pricing makes you competitive.

Utilizing a good supply chain allowed me to purchase parts for standard prices, instead of the ripoff rates offered by eBay.

If we can purchase a part for $97 that costs $250 everywhere else, that puts us at a distinct advantage. We can offer a service for $275 and make $178, whereas others would have to offer the service at much higher prices, cutting them out of the loop. Or, they can come down to our price, and cut their own throats with a lack of profits.

The additional profits we netted as a result of utilizing proper supply chains was funneled back into the business, and the high volume of customers we gained as a result of offering fair pricing allowed me to grow my client base exponentially.

eBay is for people who cannot develop vendor relationships.

Talking to vendors requires work. You have to find them, which takes time. You have to find one that caters to what you’re looking for, and to find that; you have to know what you are looking for. What you value in a vendor. Then, you have to get them to care about you and your success. This is hard.

So, what do many repair shops do? They keep the training wheels on, and use eBay. This puts you at a significant advantage.

You can’t expect an eBay or Amazon vendor to care when something goes wrong.

You can’t expect overnighted RMAs or advance RMAs from eBay & Amazon vendors when you are just an order #.

When you order off of eBay or Amazon, you are $3 of profit. You are not a returning customer. You are not a business opportunity. You are not someone they know, or care about, and you’ll be treated accordingly.

Lengthy RMA procedures will be the kiss of death for your business.

When you’re waiting on a part for a customer, waiting for an RMA kills your business. You send the part back, wait a week, then they send it to you, wasting another week. This back & forth shipping time is very often the kiss of death that precludes your customer leaving your business with their device & going elsewhere; before leaving a lengthy review detailing your incompetence.

This RMA process is based on the single order – the $3 profit margin they’re looking at when making their decision. You’re being treated like three dollars. You’re being treated like your business is worth little more than a bottled Vitamin Water, because that’s what it’s worth to them.

Good faith gets you a better RMA policy.

Let’s talk about good faith. This is what overnighted RMAs and receiving replacements before they receive the bad part back is based on.

You have a vendor you’ve spent most of your parts budget with this year. You’ve stuck with this vendor even when their prices were 10% higher. You’ve stuck with them when they’ve been out of stock, returning to them after a onesie purchase from someone else. You don’t call their customer service staff to berate them when you receive a defect. This is a vendor that knows you by name. You’ve built up something called good faith with this vendor.

When deciding whether to send you a replacement overnight or an advance-RMA, they’re looking at more than the profit on one purchase. They’re looking at all the business you’ve done with them in the past as well as all the business you will be doing with them in the future, and they might just send you an advanced RMA with overnight shipping – which saves the business and allows you to satisfy your customer.

I cannot believe repair shops expect eBay vendors to trust them with advance RMAs!

Three years ago, I decided to count how many people sent back the defective part when we provided an advance RMA. An advance RMA is when we send a customer a new part before they send back the defect, and we provide them with a prepaid return shipping label to return the defect to us.

Out of 100 returns – 14 customers sent the old part back. Out of these 14 RMAs, 11 of them were fully functional.

The reason these people never sent back the old part is simple; there was no benefit. The label was prepaid, and the box was provided, but the two minutes they would have spent to do the honest thing and return our part was not worth it to them. There was no relationship there, so two minutes of time was an unacceptable waste to the customer. They were never going to use us again, so there was no need to work with us.

This bites both ways – there is no need, in this scenario, for the supplier to put forth effort to do the right thing. There is no relationship. There is a one time profit of $3, and you will be treated like your business is worth a bottle of Vitamin Water. You will be treated as someone they don’t know, and you will deserve it if you did not make an effort to establish a relationship with the vendor.

Quality vendor relationships allow you to achieve more and obtain a competitive advantage.

Vendor relationships even the playing field.

You do not need a lot of money, or an established business to work out a relationship with a new vendor. This is something that requires work, people skills, and an agenda. You need a specific mission & purpose to figure out what you want out of a vendor, and to go out there and achieve it. You need to also bring value to the relationship for them, whether by offering insight or information that they may not have that would be valuable to them.

Let’s take a look at those necessities.

  1. Work.
  2. People skills.
  3. Clear agenda.
  4. Mission & purpose.
  5. Information.
  6. Insight.

What do all of these necessities have in common? None of them require money.
Vendor relations even the playing field because you do not need to have money to obtain them. Sure, money helps, but if your business has little money and the other business has lots of money – vendor relations can be the leveling factor that allows you to compete.

Personalized relationships are key.

We don’t talk to our vendors when we need parts. We talk every day, regardless of what we need.

We discuss trends in the business. We discuss moves that other companies are making. We anticipate demand for parts and services, but it’s not all business. I’ve discussed family life, personal life, problems, hopes, and dreams with some. The propriater of my favorite vendor has even become one of my most trusted friends & advisors.

You want your vendors to know who you are. You want them to have an interest in you and your success. You want them to like you. You don’t want to express neediness, as if you need them to like you. Rather, you should act in a manner where they can’t help but like you.

Personalized relationships get you treated like a human being.

If you want to be treated like a client, instead of a customer, you want a personalized vendor relationship.

Customers get sold parts. Human beings get sold competitive advantages.

When iPhone 4/4S LCDs were being produced that didn’t work with old versions of iOS, who gets sold the batch that does? The customer, or the human being?

When Macbook Air screens were new to the market, who gets the first carton? The million dollar conglomerate customer, or the broke 23 year old human being?

See where I’m going with this? If you have a real relationship with the people you do business with, you will be kept in mind when something comes up that might skyrocket your business or keep you from stepping into a hole. Making sure you are seen as a human by the people you do business with starts with you. How you act, how you treat them, will all play a role in how they see you.

eBay only makes sense for small odds & ends that real vendors don’t sell.

eBay’s value is in the obscure, not in the commodities.

I believe eBay should be used when we are dealing with something rare. I don’t mean the kind of rare in which it is valuable, I mean the rare as in “rarely needed”, “rarely used”, “rarely sold” – the type of rare where it is not valuable. eBay is good for sourcing components that other vendors do not sell because it would make no financial sense to do so. Odds & ends.

What’s an odd or an end vs. a commodity?

Let’s say the cable that attaches the top case to the motherboard on a five year old, unpopular laptop. No real vendor in their right mind will sell this. A low amount of these laptops were ever sold, the laptop is worth very little as it is very old, and this part rarely if ever goes bad. It would make no sense for a real vendor to sell it. As a result, I will often look on eBay for it. This is an odd & end.

A commodity is a part that everyone has; something that can be acquired from many sources. A laptop LCD, an iPhone screen, a Macbook LVDS cable. You have options when purchasing these parts, and your option SHOULD be a vendor you have a long term relationship with.

eBay should be used for parts when you have no other sensible options!

When forced to use eBay for these items, USE EBAY WISELY!

When purchasing these small odds & ends for repairs, don’t use eBay expecting everything to go as planned.

If a customer is leaving in 3 days, DON’T TRUST PRIORITY MAIL TO GET IT THERE IN THREE DAYS!

Use Express Mail. And even then, give the customer the option of returning their device by mail, FedEx, or UPS incase it doesn’t come in in time.

Plan for disaster. Plan for it to take a day to ship. Plan for a snowstorm to hit the county in which the part is shipping from.

If it’s cheap and you’re making money, buy more than one!

If the cable or part you are ordering is $5-$25 and you are getting $150-$200, do yourself a favor – buy two. Buy them from different vendors. This way, when you get screwed by one of these vendors, you’re still able to offer good service to the customer.

Don’t expect this to be easy – it’s not supposed to be!

It pains me to watch technicians buy parts off of eBay and complain when they do not work.

Isn’t it beautiful to you that this is NOT easy?

If this were easy, customers would be doing the work themselves.

Don’t offer customers the same poor experience they would have repairing their own device!

When someone comes to you, they expect better. They expect an excuse-free, hassle-free experience. They came to you to avoid the pitfalls of delays, bad parts, & non-working junk that they must wait weeks to return.

What many repair shops do not realize is that by purchasing from eBay, they are offering their customers the risk of a bad experience that they came to the repair shop to AVOID!

These parts are not always going to work; you can’t be mad at that.

Don’t take it personally when things don’t work.

Many repair shop owners become personally agitated at vendors when they receive a defect. Even good vendors will become the target of anger when they ship a bad part.

Understand why these parts do not always work.

When you order an iPhone screen, you’re ordering a device with millions of small transistors inside of a thin glass layer, that cost about $15 to produce, that was sent to you in an envelope via the US Postal Service. How can you possibly expect every one to work?

I am not surprised when I receive a defect. I am surprised when more than 10% of them work!

There are, however, good reasons many eBay parts do not work.

Many eBay vendors take parts out of abandoned, ewasted, recycled machines to sell to you.

Let’s say a laptop is dead. It was tossed in an ewaste container.

A parts company will part it out and sell all of its parts on eBay. It is far easier to refund the customer who receives a defective part than it is to figure out which parts do & do not work inside of that laptop. It is built into their business model that they are selling broken parts which will have to be refunded, and you are purchasing these parts for mission critical repairs – YIKES!!!!

In conclusion!

Develop relationships with your vendors. Use these relationships to gain a competitive edge over your competition. Leverage that competitive edge to become more successful, and smile at your success, because you earned it through doing what’s right; instead of doing what’s easy.