8 Steps for Successful Supplier Relationship Management
How to Manage Relationship with Your Supplier
Buyers generally spend most of their time focused on processing customer orders, monitoring market trends and maintaining stock levels to continue meeting their customer’ demands, neglecting something that should also have a high priority in their business: managing supplier relationships.
Good supplier relationship management can deliver an array of benefits that lead to a buyer’s competitive advantage, such as higher customer satisfaction, better responsiveness to customer demand, greater frequency of on-time delivery by suppliers, improved supply chain efficiency, lower risks of disruptive events in the supply chain and minimal risks of reputation damage. Therefore, supplier relationship management should never be overlooked.
In this article, we discuss the top eight ways buyers can establish and maintain positive relationships with suppliers.
1.Be fair and ethical
It’s easy for buyers to favor certain suppliers over others, especially in instances where a supplier is better known or the buyer gets along with the supplier’s representative. However, when you have a range of suppliers trying to win your business, give all the qualified suppliers an equal opportunity and take all personal factors out of your consideration. This will help you understand better the advantages (and disadvantages) of each supplier and make a better informed decision.
2.Negotiate with honesty and integrity
When trying to negotiate with new suppliers, buyers can be tempted to share a quote received from another supplier or even lie and reveal a lower price to get the supplier to match or beat that price. However, this will likely lead to a sour relationship in the future, so buyers should avoid divulging confidential quotes or fabricating prices from other suppliers. In addition, buyers must always maintain integrity and never inflate order quantities to obtain lower prices during the negotiation process only to proceed with ordering a smaller quantity when the contract begins.
3.Set clear projections ahead of time
The key to efficient sourcing and great supplier relationships is to mitigate risks of delays or low stocks that fall short of meeting customers’ demands. Communicate estimates based on your customers’ past order trends to your suppliers in advance to allow them enough time meet your requirements – wholesalers will need to communicate your projections to their manufacturers, whereas distributors will need to adjust their orders based on your numbers. Therefore, it is absolutely crucial that your projections are as accurate as it can be, to achieve the right levels of inventory without over or under stocking.
4.Follow their processes
It is also important to talk to your suppliers in advance to understand the format and schedule that works for them best in terms of communicating projections. Some suppliers might favour simple spreadsheets sent to them every month, whereas others may prefer that you fill their online order form every fortnight. Following their processes thoroughly helps you get in their good books, while at the same time, maintaining sourcing efficiencies.
5.Pay invoices on time
Keep in mind that the supplier also has a business to run, so it is important for them to receive payment on time. Note payment terms on every invoice and follow them diligently. If for some reason you are not able to make the payment on-time, advice the supplier immediately and let them know when they can expect. Ultimately, the goal is to show your suppliers that you are a customer they want to continue doing business with.
6.Maintain open communication lines
This is perhaps the most important way to maintain a good relationship with your suppliers. Share with them your business strategy and goals for the upcoming year, and outline clearly how they play a role in achieving those goals. Set up information days in your and your suppliers’ offices so your key sourcing staff can personally meet your suppliers’ representatives and share information on new products, markets or personnel. Visit their premises to understand clearly the ins and outs of their business. Greater understanding of each other’s businesses will help forge a mutually beneficial relationship over time.
Personalizing relationships with suppliers is a strategic move that can help you get an edge over your competitors. At the end of the day, you are working with humans and it is common that people prefer to work with people they like. Creating a friendly relationship with your suppliers’ representatives is always beneficial, as ultimately, they would rather help out a friend over another customer. Try and personalize supplier relationships by inviting them to company events and parties to interact with them at a more personal level.
8.Don’t play the blame game
The biggest test for buyers in maintaining good relationships with suppliers is during crisis. Buyers can forget that suppliers work with humans and technology that may commit errors and external factors that are beyond their control. Mistakes happen from time to time, and blaming your supplier for a problem is only going to turn the relationship ugly moving forward. The key to maintaining a good supplier relationship in the midst of a slip-up is to stay calm and work around the problem to find a solution. And once it is solved, you can work together with your supplier to investigate the reason for the problem and take the necessary actions to prevent it from occurring another time.
Ultimately, a good buyer-supplier relationship develops into a partnership over time, which can deliver consistent wins to both parties in the long run. To capitalize on all the advantages, it is crucial that businesses follow the above steps to manage relationships with suppliers.