Prove your mettle (!) and worth to your customers.
The fourth quarter of every year is the prime contract-negotiating season for most major base and minor metals. Commercial executives in metal sales toast at Claridge’s in London, hit the links in the U.S. Southwest or navigate the bustling streets of Shanghai while at the same time trying to convince their customers – smelters, steel companies, chemical producers and others – to sign up for another year of volume.
It’s a frenetic season of flights, conferences, long evenings and in some cases 50 or more customer meetings in the span of a couple of days. The metals trade still tends to be a face-to-face business, with great value placed on relationships and personal interactions.
Competition among suppliers – mining companies, agents and distributors, for example – can be fierce, though. Differentiation in commodities is hard to obtain, with most suppliers meeting the necessary quality and delivery thresholds. Further, procurement staff are constantly under pressure to seek the cheapest prices, and loyalty to a particular supplier can pale in comparison to the demands of a buyer’s shareholders and management’s cost reduction/avoidance targets.
Sitting in various negotiation meetings in my earlier days in metal sales it was almost assumed that the buyer and supplier knew the details and flow of their relationship. Or maybe it was the blurry eyes after a late-night dinner!
Later on it became clearer, especially once I moved into management, that in the heat of contract season – with jetlag, the sheer number of meetings, management pressure, and the stress of navigating the seeming diametrically opposed goals of sellers and buyers – that negotiations were not that deep. Anyway, the sales and buying organizations in industrial firms have shrunk over the years, with attention spans and resources stretched thin on both sides.
Opportunities were missed, especially for suppliers, to tell a compelling story that could make negotiations richer and potentially lengthen the relationship with target buying organizations.
The Partnership Performance Snapshot: Analytics As Story
As I began managing annual negotiations I created what evolved into what I now call a Partnership Performance Snapshot (PPS). The concept is simple: A shareable short document, or a short PowerPoint slide deck, that succinctly details the relationship over the contract period.
A PPS seems like a simple concept and some metals firms may do it. A lot of firms do not. Partnership Performance Snapshots are more than greatest hits compilations. They should tell a story about why as a supplier you are unique.
The PPS, among other things:
- Helps provide a common context between buyer and seller during negotiations.
- Produces insights into a buyer’s business and industry that can materially enhance their planning and personal standing within their own firms.
- Provides concise summaries to suppliers to help navigate and intelligently participate in the large number of meetings during contract season.
- Offers a persuasive, differentiating, memorable summary to buyers as they try to sort through their procurement choices.
- Opens up discussion about changes in contract terms and buyer product, delivery and quality needs.
- Are ultimately a front-end to a comprehensive advanced analytics program for metals marketing, something that is becoming more crucial for metal supplier competitiveness.
What’s The Story?
A comprehensive PPS from a metals supplier may include the following:
- Your company’s safety, health and environmental statistics: Not only a differentiator but also a necessity, especially in the mining industry.
- Volumes by product, geography and SKU: Include delta from previous years, if available, in visual format. Compare also against forecasts. This may spur discussion about business trends during the current year as well as evolving buyer product needs for the coming year.
- Revenues, discounts, average pricing and quotational periods: Visually show total sales to the buyer, as well as an analysis of discounts versus market pricing. Show positive impact in total value (e.g. U.S. Dollars) if there are discounts. Provide average sale pricing, preferably on a month-to-month basis at least. Show distribution of declared quotational periods (e.g. 3MAMA, M-1). Though there’s potential this data may be distributed to others, it should fall under non-disclosures that are part of most standard supply agreements.
- Shipping/delivery history and exceptions: This is an opportunity to show the supplier’s logistics prowess – on-time or just-in-time logistics can be a lifesaver for metal-consuming businesses. Conversely, this data can open a frank discussion if the supplier dropped the ball and has put in place new procedures that rectify past shortfalls.
- Cases and disputes: List not only the nature of the disputes but also the time it took to resolve them or open issues that are hindering closing of such cases.
- Product quality: Metal content and impurities over time and commentary if there will be a marked change in the future.
- Payment history: Days sales outstanding data and other information potentially can spur a discussion on supplier forbearance and flexibility.
Sounds pretty straightforward, huh? It is surprising, though, how putting this information all into one document can be used to vividly weave a powerful story of performance (or improvement) that justifies a buyer’s decision to choose you!
Still, the key data points for the Partnership Performance Snapshot above are only just the beginning. You can further provide insights to the buyer that help their planning and burnish the buyer’s reputation within their own company. Buyers want to be seen as experts in their market.
The Next Level
As a supplier, you want to show that you are a key advisor to a buying organization. Information you provide not only can help steer a buyer to your cause and products but also create a deeper relationship through a shared vision of market trends.
As a supplier, you want to show that you are a key advisor to a buying organization.
Thus, some other “next-level” items that should be part of a PPS:
- Summary of your unique selling proposition: In commodities where competitors generally are on a level playing field product, delivery and quality-wise, you have to differentiate. Thus, an empty slogan here is not only a waste but also a sale loser. What is your guarantee to a buyer in one sentence? Why are you different? Why shouldn’t you compete on price alone? Don’t assume the buyer knows. State it clearly and discuss what it means. This could even be different depending on the buyer.
- Show your own production profile: As a miner (or even as an off-taker) one key way to show stability as a supplier is a historical analysis of material availability. Surety of supply has some value to a buyer. If some supply disruptions have occurred, again this is an opportunity to show how the possibility of disruption has been mitigated for the future.
- Show import–export statistics: By showing analysis of trade/production flows – of raw materials and also key end-user products – a discussion about current and future supply-demand may be initiated and can possibly buttress suppliers’ views on pricing and other market dynamics. Such trade data can be gotten from government sources – many of which are still free – or private trade databases. If imports have dropped in one region and increased in another an argument could be made that supply may be tight in the region affected by lower imports. One statistic I used was national production of certain grades of steel in certain markets that used as an input the product I was selling. Increases in end-user product production could mean tighter supply of raw inputs. Sharing such data with a buyer helps establish legitimacy, and may even help them plan not just what they are buying from you but also their plans for other raw material inputs, e.g. nickel buyers for stainless steel companies also are purchasing chrome and other metals.
- Show pricing trends: The standard dance during negotiation season includes the following – Supplier, “The market is tight! Prices are on the way up!” Buyer, “Uh, looks like there’s a market surplus and prices will be ‘Meh.’” It’s best to include some statistical analysis of long-term pricing. Even better, many banking analysts offer their own pricing forecasts and summarizing these with attribution can be useful as a third-party source of information.
- Key news items: You can make a PPS more relevant and timely by citing market news reports, public-domain analysis, article links, etc. on industry trends. This adds immediacy to your overall supplier story of performance.
Dos and Don’ts
When contemplating putting together a Partnership Performance Snapshot here are some key things to initiate or avoid:
- Do perform deep statistical analysis: Use software tools or ideally hire an analyst who can dig for market and sales insights. Such insights can lead to deeper customer interactions and increased internal knowledge of markets and trends. One rich conversation I had once with a buyer included looking at how his company’s stock price positively correlated over time with the London Metals Exchange’s nickel price – something he did not know.
- Do spend on external data: The mining industry, especially when commodity prices are low, is notorious for quickly cutting “extra costs” such as publications and access to private databases. Big mistake. I personally know from experience that access to important market data can mean the difference between company survival and success. Invest in market knowledge, particularly during turbulent markets.
- Do coordinate with internal departments: Working with investor relations, communications and other departments will not only ensure the alignment of PPS messages with corporate messaging, but also these departments can be a source of data and support.
- Don’t throw a spreadsheet at your buyers: Spend some effort not only compiling a bunch of data but also creating an eye-catching document with a coherent story. Data without context simply won’t be used or may confuse a buyer.
- Don’t use proprietary information: This seems like a given, but when a supplier is providing material to many companies that may compete against each another one must guard against accidental disclosure of competitive information.
- Don’t breach copyright law: Be sure to purchase the correct licenses from your data provider and adhere closely to the license terms. Metal pricing providers such as CRU, Platts and Euromoney have very strict rules about the use of their pricing data.
Partnership Performance Snapshot & Advanced Analytics
For a supplier it may seem daunting to collect all of this data and distill it into a short document in a short amount of time. You’re correct. Depending on the number of customers you have the data for basic PPS may be compiled, say, during a flight to Heathrow. It would be difficult, though, to author a bespoke, powerfully relevant document for each one of your buyers this way.
For a supplier it may seem daunting to collect all of this data and distill it into a short document in a short amount of time. You’re correct.
Ideally, a PPS is a manifestation of a robust customer relationship management and key account management program that makes real-time customer and performance tracking integral parts of standard business processes. Cloud-based services such as Salesforce.com make it extremely easy to succinctly compile a visual history of supplier performance and industry data, and can even search out key news headlines and social media mentions that a supplier can share with a buyer.
When it comes time to publish a PPS for contract season, a company with advanced analytics capability should have this process down to simply a few keystrokes and mouse clicks, with some internal discussion and work with the sales team regarding additional commentary to add. I found that a CRM system was a lifesaver in preparing for negotiations and could be an instant help – mobile access to a CRM system through, say, an iPad can be a great addition to a supplier-buyer discussion.
Ideally, a Partnership Performance Snapshot is not limited to contract season every fall. A PPS could be published on a regular basis and distributed by email to a buyer. Or, a metals supplier could provide a performance dashboard through an online customer portal. New opportunities for highlighting differentiation in metals also abound in digital marketing, particularly in content creation, email and search engine marketing and social media.
With advanced analytics a PPS is not just a picture or snapshot – it’s a film.
In this way, with advanced analytics a PPS is not just a picture or snapshot, it is a film: It is a visual story over time that you hope clearly conveys the value you provide and keeps you as a premier supplier to your customer.
Note: A version of this article was first published on LinkedIn November 2017.