Supermarkets who treat their suppliers well are rewarded with better performance, according to a new study from the University of East Anglia.
The study found suppliers who believe they are fairly treated by retailers put more resources into their relationships with buyers.
Published in Supply Chain Management: an International Journal, the findings claim the way supermarket buyers treat their suppliers matters more for the latter’s performance than their status as key customers.
Researchers Dr Ricardo Santana and Professor Andrew Fearne, of UEA’s Norwich Business School, also found the length of time a small producer had been supplying a supermarket made no difference to how they perceived their treatment.
“Larger retailers should design strategies to enhance necessary elements of relational justice,” said Santana. “[They] should empower and encourage buyers and category managers to foster social elements, for example by offering the supplier the opportunity to provide input on decisions that affect the relationship, and fairly rewarding the suppliers who invest in the relationship by meeting standards and deadlines.
“Positive and negative exchanges can have unexpected consequences that ultimately determine the health of a relationship and resulting performance outcomes.
“Managing buyer-supplier relationships is, therefore, a challenging social task that involves tackling behavioural issues and power dynamics between the buyer and the supplier.
“Such strategies can help weaker suppliers feel that their voices are heard, concerns are addressed in the relationships, and their account managers are treated with dignity, courtesy and respect.”
Santana added: “This study finds that such perceptions help suppliers perform better in their relationships with key customers, which eventually could be beneficial to the whole relationship and be in the holistic, long-term interest of the supply chain.”
Fearne said the relationship was a two-way street. “In the highly competitive environment of fast-moving consumer goods, it is not purely down to the behaviour of the buyers,” he said. “It’s also about the way you as the supplier behave.
“All suppliers, whether old or new, need to stand out from the crowd. This is particularly important as retailers are having to rationalise their ranges so they can do better deals and make it easier for customers to shop. Market power has diminished as customers are talking with their pockets.
“There are suppliers who invest significant resources in their key customers, such as a big supermarket, and in return they get treated fairly by the buyers, so they can perform better than those who don’t recognise the importance of good customer service.
“We need smaller businesses to behave like big companies and we have found evidence of suppliers doing better when they are proactive in managing their customer relationships. If you provide good customer support, buyers will support you in return and will listen when you’ve got problems.”