Success in business is largely defined by relationships. Each company sits in the middle of a chain of relationships created with suppliers and customers by taking raw materials, products, and services from one end and adding value to generate profits at the other end. In the roofing industry, the supplier relationship takes the form of a vendor-customer affiliation, as the parties are codependent but work independently to achieve their individual goals.
The relationship is primarily driven by a two-step distribution model predominant in the industry where manufacturers sell to distributors, who in turn sell to roofers. Under the model, partnerships and loyalty are engendered. As such, roofing manufacturers and suppliers counteract the lack of loyalty through partnership programs designed to offer incentives in exchange for loyalty to their brands.
Building strong supplier relationships provides you with access to marketing, sales, technical, and logistical expertise that will help you accelerate business growth. Developing a joint business relationship with measurable objectives will provide a commitment by both parties to prioritize their time to achieve success. Furthermore, the relationship can lead to enormous long-term positive benefits.
Long Term Benefits of Supplier Relationships
Strong credit history
Most roofers highly depend on trade credit to run their operations. Since roofing varies with the seasons, trade credit is essential to finance the business when your cash flow is tight. Establishing strong supplier relationships helps your business access trade credit from multiple suppliers, in turn giving your company a strong credit history. Oftentimes, new suppliers will want to know if your business is reliable and eligible for trade credit through previous payment history. Having trade references from your existing suppliers will help you provide references that can vouch that you will pay on time. Ideally, your credit account with references will help you confirm how long you have been using trade credit and your ability to meet payment deadlines.
With a strong credit history, you can negotiate from a position of power. The extra liquidity that comes with a consistent working capital solution ensures that you can negotiate for larger contracts, fulfil, and secure more economical supply orders with larger shipments and reduced costs. This allows you to negotiate for better terms with the supplier and opens an opportunity for bulk discounts and flexible repayment options.
Pricing Volatility Mitigation
Price volatility is a sensitive issue for many roofing companies as it requires careful weighting of price volatility against the contract length and volumes. Material price escalation is not new to the roofing industry, which has experienced historical periods of price escalation and commodity super-cycles. The price of roofing materials has risen dramatically over the last year, primarily due to the global pandemic and trade policies implemented by the government. Commodities traders and economists are considering the situation as a potential super-cycle. Roofing companies need to establish how much price volatility can be absorbed.
With strong supplier relationships, roofers can negotiate the price thresholds through an agreed-upon rate to justify the increase. Suppliers also benefit from these relationships as they will commit to more modest and flexible pricing models for long-term contracts in order to mitigate risks and exposure. By taking into account their margins and interests, you can also protect your business. Negotiated margins and open book policies, as opposed to fixed contract pricing, allow both roofers and suppliers to benefit from fluctuations in the market and pricing.
Close Relationship with Staff
Established supplier relationships are an asset to your team. When you contract with dependable suppliers and work to maintain those relationships, it makes it easier for your employees to have stronger relationships and improve their productivity. Various processes and tasks within your operations are simplified, including administration and accounting functions, inventory management and product fulfillment. Furthermore, in today’s tech space, savvy suppliers are continuously seeking ways to force costs out of their business while looking for new and better ways to add value to yours. Introducing self-service options for your staff to their computer systems can improve business efficiency by allowing your staff to check order status and product availability. In addition, your customer service team is also able to field fewer complaints about shipping delays or quality issues.
Although taking care of your employees through creating an enabling work environment, motivation, and compensation creates happy employees, simplifying your operations too allows them to put extra effort into their jobs. In the event of inevitable challenges arising within the supply chain, having close relationships with staff makes it easier for them to resolve issues by seeking mutually beneficial solutions that benefit your company and your suppliers.
Supply Chain Consolidations and priorities
Improved supplier relationships allow you to have an in-depth understanding of the supplier’s business model, products, and services. In return, suppliers are also able to understand your needs. As such, both parties are able to look for areas of consolidation across existing products and services, as well as the potential of adding new product and service offerings. With consolidated operations, your business will get priority when the supplier is giving discounts or in the event of material shortage.
Once a mutually beneficial relationship is developed, and your business is seen as a preferred low-risk customer, suppliers will make suggestions for improved supply chain processes and bulk delivery patterns that further improve your profit margins. You could also potentially partner with major preferred suppliers to share risk, enjoy extended payment terms, increased warranty periods, and even hold inventory on consignment.
Laying the Foundation for Strong Supplier Relationships
Building strong relationships with your suppliers means rethinking procurement in other terms beyond the mechanics of purchase agreements and contracts. It means focusing on how you interact with suppliers beyond signing your contract and sitting back for the process to play itself automatically. Building strong relationships is about people management and the added value that the human aspect can bring to operations. Keeping this in mind will ensure improved service delivery for your customers.
At Red Hawk Roofing, we value our supplier relationships. Over the years, we have established relationships with Insurance Agents, Adjusters, and Property management companies in Denver and surrounding areas, which has allowed us to extend quality services to our customers. For quality roofing services for commercial and residential buildings in Denver, get in touch with us!