Having a good balance between the client’s requirements and the vendor’s services is crucial. How can you get your client the best possible solution for the best price possible, without shortchanging your vendors? This balance is an art.
Understanding the triangle
What is this triangle I speak of, you say? A triangle, as many have also used, is a diagram that shows you what you can and cannot have. Taking into the fact that I’m in logistics, let’s use a logistics solutions triangle.
In this particular case, you’d have 3 different points, signifying 3 different attributes to a logistics solution. In any case or situation, you’d only be able to choose 2 out of the 3 points. Why? Because you can’t have your cake and eat it too.
Clients tend to always want speed and quality but are not willing to part with price. Vendors on the other hand need price to be able to provide the two. Otherwise, the vendors would have to sacrifice 1 of the 2 the client really wants, and in most cases in my industry, it’s quality that suffers.
Like many things in life, this triangle should not be a foreign concept. Everything has a balance and this triangle concept is no different.
So how do you balance between what you want and what your vendors want?
The client’s interest
Understanding what the client wants exactly can save you a lot of pain and confusion. Sometimes, it’s best not to assume what the client wants and ask before you even try to figure out how to get everything!
If you’re lucky, the client knows exactly what they want and ask for 2 out of the 3 things.
Some clients don’t waste time. They’re experienced in the market, they know what they can and cannot get and they get straight to the point. Generalising here and speaking from experience:
Chinese sellers on mass marketplaces tend to want things reliable and cheap (sometimes, just cheap). They don’t often care about speed.
European/North American sellers, brands.coms, etc. tend to want things fast and reliable, but at a price that is reasonable.
Luxury brands, they…they don’t care.
Again, don’t assume! While the above is a generalisation, not everyone are equal and they may want different things. It won’t be my fault if you insult your Chinese clients!
The vendor’s interest
Look, as a vendor myself in the past, it’s not that I want to make your life difficult, but economics is economics. If our cost is $1.00, there’s no way we can give you anything for lower without compromising on the solution that we’ve already built for you.
Going back to the triangle, pushing your vendor’s price down would only mean one of a few outcomes:
- The vendor reduces the margins they have in favour of volumes and business.
- The vendor breaks even in order to maintain the relationship.
- The vendor cuts corners to ensure the business is still with them.
The issue with all of the above outcomes is this, your vendors won’t be happy.
From the vendor’s perspective, pinching margins especially in logistics is not uncommon. We do that all the time with volumes and economies of scale in place because that’s just the way the business works. However, when you push a vendor to go so low that their margins are almost nil, what’s in it for them?
Bear in mind, if you’re a startup/brand, not every logistics company out there is going to chase a logo to slap on their website. Most logistics companies don’t care the profile their clients hold, just that there’s freight to move, a job to be done and money to be made.
Making sure the vendor is happy, while still getting what you want, is important. Even if they say they’re happy, ask yourself if you would. Happiness and content with what you have doesn’t last forever. You either hike the price down the road or bring in more business.
How do you then strike the right balance between your clients and vendors? Easy. Put yourself in everyone’s shoes and see how happy or unhappy you are in the various scenarios that you can picture. Then find one where compromise is possible.
Maybe, pinch margins a little but push back on the client’s requests for lower rates because factors does not permit. Ultimately it’s understanding both sides of the coin and advocate for both sides.
If you know your vendor’s margins are already low, advocate for the price you’ve set for your clients and tell them it’s not doable, or lower your own margins. The name of the game is to keep everyone happy, and if you’re only willing to sacrifice the margins of your vendors, you’re not doing your job.
Keeping vendors happy keeps relationships alive and fresh.
How do you balance your vendors and clients?