There’s a lesson I learned in the late ’90s I won’t forget.
I was running the supply chain for a telecom company during a boom cycle. Business was exploding, and like a lot of companies at the time, we were pushing hard—ramping capacity, driving suppliers to increase output, and betting big on our forecasts. We had one supplier in Japan producing high-precision ball screws, critical for our circuit placement machines. We asked them to go from one unit a day to six, then told them to prep for twelve.
They built to meet our signals.
Then the market collapsed.
Overnight, we went from needing twelve units a day to needing six a month. Not only did we fail to absorb the inventory we’d driven them to produce, but we also left them holding the bag. They had tied up capital, floor space, labor—and we didn’t follow through.
That supplier went under. And the telecom company I was with at the time was part of the reason why.
If you’re in a leadership role today—especially in supply chain, ops, or finance—you need to understand this: supplier relationships aren’t just transactional. They’re strategic. And when you treat every vendor the same, you’re setting yourself up to fail.
Not All Suppliers Are Created Equal
Too many companies talk about supplier collaboration, but don’t back it up with segmentation or strategy. I break suppliers into three buckets:
- Strategic Suppliers – These are the ones you can’t live without. You need deep, ongoing relationships here. They should be part of your SIOP (Sales, Inventory & Operations Planning) process. You should know their capacity. They should know your demand signals before you publish them.
- Commodity Suppliers – You’ve got options here. Still important, but you’re not building your operation around them. Your job is to ensure predictability, clarity, and fair terms.
- Distributors – Frankly, outsource the complexity. These are typically catalog parts or common items. Let your procurement systems or partners handle them.
The problem comes when leadership can’t—or won’t—make these distinctions. I’ve seen companies apply the same blunt instrument across all three. It’s inefficient at best. At worst, it’s catastrophic.
The Cost of Bad Signaling
Here’s what leaders often miss: when you don’t bring your strategic suppliers into your planning cycle, you’re just making noise.
I’ve worked with companies that “demand forecast” in isolation, push out inflated numbers, and then scale back without warning. That whipsaw effect? It doesn’t just cause frustration—it destroys trust and breaks supply chains.
Strategic suppliers are investing in your success. If they’re ramping labor, buying materials, or taking on risk to meet your projected needs, you owe them clarity. If you don’t give it, they’ll either walk—or fail. Either way, your business pays the price.
What Good Looks Like
The companies that do this right embed key suppliers into their planning process. I’m not talking about a quarterly review. I’m talking about live participation in monthly SIOP meetings. Shared forecasts. Early warning signals. Joint problem-solving.
I saw it done right in a capital equipment business I worked with years later. Same kind of component, same kind of ramp. But this time, we had structured supplier tiers. We gave long-term visibility. We talked through demand shifts in real time. And when the market hiccuped, our suppliers were ready—because they were prepared.
That’s the difference.
Final Word
If you’re leading a supply chain, you’re in the trust business. You can have the best tools, systems, and contracts—but if you’re not building real relationships with the suppliers who keep your business moving, you’re playing roulette with your future.
Stop treating every supplier the same. Know who matters most. Embed them in your process. Signal clearly. And when the next disruption comes—and it will—you’ll have partners at your side, not liabilities on your balance sheet.
