In any stock-based business, it is crucial to manage supplier relationships well. Developing constructive relationships with your business’ key suppliers is important to secure reliable supply, unlock competitive pricing and to understand emerging trends that may impact on your business. Despite a growing number of businesses taking a supplier relationship management approach in recent times, many businesses do not have the skills or understanding to maximise supplier goodwill and cooperation. Here are a few tips:
Understanding Supplier Relationship Management
To develop considered, rather than ad hoc, relationships with suppliers, it is useful to understand what supplier relationship management actually requires. Supplier relationship management essentially involves taking a strategic approach to planning and managing a business’ interactions with a supplier in order to maximise the value of that supplier to the business. It often includes identifying collaborative opportunities with major suppliers to create new value and minimise the risk of supply chain failure, which can have adverse consequences for your business.
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Invest in Appropriate Software
Although there are specialist supplier relationship management software solutions, these may not be necessary for smaller businesses. However, consider investing in inventory management or supply chain management software that has a supplier relationship management function. Using specialised supplier relationship management tools is likely to be significantly simpler than developing custom tools or processes to monitor supplier performance and track supplier commitments. This is particularly the case with growing businesses – as you partner with an increasing number of suppliers, it becomes harder to manually track each one.
Walk the Talk with Suppliers
Ideally, you will be managing customer relationships as well as supplier relationships. You can expect a competent supplier to be doing the same. Wholesale customers can demonstrate to suppliers that they are good customers in two key ways – communicating well and paying your invoice on time. Suppliers will often grapple with a number of competing customer needs. By giving your suppliers as much lead time as possible, you take a significant degree of stress out of their operation. Suppliers will also often struggle with non-payment or late payment as just like your business, your suppliers depend on payment to sustain a healthy cashflow. If your suppliers regularly have to take time out of their busy schedules to chase unpaid invoices, developing a truly collaborative supplier relationship is almost out of the question.
Partner with Fewer Suppliers
There are a number of advantages to working with multiple suppliers, such as spreading risk, increasing capacity and gaining exposure to a wider catalogue of products. However, managing relationships with too many suppliers can sap vital resource and energy from your business. While increasing the number of suppliers initially leads to reliability and value gains, at some point the increased administrative and relationship management costs outweigh those gains.
Agree on Performance Measures
Successful supplier relationship management requires clearly defined performance expectations. Although developing performance expectations may take some negotiation, they are important to have in place so that there is an objective standard agreed on by both parties. Any performance expectations should be specific and measurable so that supplier performance can easily be ascertained.
Topics: stock control, supplier management, supplier relationship, supply chain