Demanding closer supply

Posted on 31 Mar 2009 by The Manufacturer

A new report from HSBC Commercial Banking has reiterated the need for close, reciprocal style relationships between small and medium sized (SME) manufacturers and their suppliers as a way of easing the pressure of economic uncertainty.

The ‘Value of Relationships’ report found that 58 per cent of SMEs in manufacturing and production claim to have good relationships with all of their suppliers but 84 per cent of manufacturers, compared with 64 per cent of all businesses, said good relationships were ‘vital’ to their success. This rose to 97 per cent, in terms of the SMEs in manufacturing that believe good supplier relationships are critical in times of economic hardship.

Only 65 per cent of manufacturers said they typically get respect from their suppliers and only 10 per cent said they thought their suppliers could give them ‘good’ deals. Both these figures were though the highest of any industry.

The businesses questioned said that trust is the number one factor in making a supplier relationship work (56 per cent), with reliability, consistency of service and delivery coming second (22 per cent). Less than one in 10 businesses (nine per cent) isolated value and cost as the defining factor of a good relationship.

“SMEs recognise that good relationships with suppliers are vital to help them navigate through testing economic waters,” said Noel Quinn, head of commercial banking in the UK at HSBC. “For suppliers committed to helping businesses succeed, it is clear that having a close relationship comes from developing a good understanding of the company and building trust.

“Our research found that businesses want, and benefit from, close relationships with their suppliers. We are working in partnership with our customers – to provide advice and relevant financial solutions – and have recruited more relationship managers throughout the UK, allowing us to spend 40 per cent more time with customers this year. Our connected international network of 8,500 relationship managers is helping to provide appropriate strategic financial guidance and cement business relationships around the globe.”

Interestingly, the research found that successful business relationships are based on the people rather than the companies – 31 per cent of those questioned said they need to like the individual but not the company to have a good relationship. Also, the majority of successful relationships mix formal and informality, with trust being given more easily to suppliers with whom they have personal relationships with.

Manufacturers and those in the production industries also rode high in the list of types of companies that valued site visits from their suppliers.

HSBC’s research was conducted by The Next Big Thing and took in 500 SMEs. A mixture of quantitative and qualitative methods was employed. Ninety per cent of respondents were company owners and ten per cent were finance directors or chief operating officers.