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Standard of Excellence: The Importance of Supplier Retention

Those of us in business are always pre-occupied with customer retention. It is a known fact that it costs 10 times more to gain a new customer than it does to keep one. Even venture capitalists judge a company on its "churn" (customer turnover) rate and give companies with a lower churn rate the highest valuation.

We spend a great deal of time and money on attaining low customer turnover rates, making sure that we keep those good customers we worked so hard to attain. But what about holding onto our good PCB vendor/partners? We need to be sure that we are retaining our good suppliers with the same diligence that we hold on to our customers.

Certainly, at times this goal can be challenging. Simply put, stuff happens. Companies and suppliers have challenges that can cause them not to perform as well as they should. Processes can break down, key personnel can leave, equipment breaks, or they run into money problems. In our industry there are so many steps to building good circuit boards day in and day out that there can be many opportunities for something to go wrong.

Therefore, as good customers, we must closely partner with our suppliers to make sure that we help them stay on track-no matter what happens. We need to do everything we can do to keep our valued suppliers happy and profitable enough to stay around to help us with our PCB needs.

A good solid, consistent, reliable and trustworthy supplier is hard to find and keep. Here are five things we can do to make sure our partnerships with our suppliers are always healthy.

1. Communication: Set up a steady channel of communications with your suppliers. Have regular meetings with them to make sure they are on track to meet your needs. I strongly recommended setting up a schedule of regular meetings. Create that time to talk, whether things are going well or not; always stay in touch.
2. Respect: Respect their needs as much as you want them to respect yours. There is nothing more counter-productive than a customer shouting at a supplier when things go wrong. If you truly value your relationship with your supplier you will always treat them with respect, even when things are at their most challenging.
3. Be helpful: When things go wrong-and sooner or later they will-help them. Be ready to help your suppliers solve their problems. If they need more time, figure out how to give it to them. If they need a deviation to the spec and it's something you can live with, do it. If they need some technical help that you can provide, then provide it. If you are really your suppliers' partner, you will do whatever you can to help them.
4. Pay them on time. PCB shops operate on very slim margins. Anyone who has worked in a PCB facility knows first-hand that they are not making money hand over proverbial fist. Their profits are very slim, if they have any at all. They never have enough cash flow to act as your company's personal bank. I know for a fact that many of their other customers, especially the mega companies, love to force them to accept terms that can reach out to half a year! Don't be one of those customers. Here's a real tip for having a great partnership with your PCB vendors: Pay them and do it on time. Let me say that again: Pay them on time, which is 30 days out at the longest. Do that, and you will receive the best service you've ever had.
5. Let them make money too: I know this sounds obvious, but it's not. There is a weird assumption that PCB fabricators are making too much money. I cannot tell you where this idea comes from, but I know that it's not true. For some reason, companies believe that PCB suppliers are rolling in dough. They are not; they operate on very slim margin with processes that can be precarious at times. Most PCBs take more than a hundred steps to build. The equipment is very expensive and the materials they use have steadily gone up in price over the past 20 years. Yet year after year, some of their customers insist on price cuts. Don't be one of those customers. Help your vendor partners make some money and stay alive to work with you for another day and another year into the future. What good is a great PCB vendor/partner if they are out of business?

These five things are not difficult to do. In fact, they are the humane things to do, and by far the right way to treat your PCB partners. In the end, it will only benefit you and your company to have PCB suppliers who treat you the way your treat them-which is as much the case in business as it is in life.

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