PricewaterhouseCoopers have conducted research into supplier relationship management and have found that sadly, few companies do it well. Successful supplier relationship management (SRM) is an untapped source of opportunity which should be carefully considered and implemented for increased business success and smooth operations.
Rarely are companies sole entities capable of functioning optimally on their own. They have a product or service they provide to other companies and likewise they must rely on suppliers to do the same for them. In fact, sometimes companies are so incredibly reliant on their suppliers for a consistent supply, that without it or when glitches occur, they can be in a major pickle. So why not seek to understand how to improve these relationships and get the most out of them?
Like any marriage or union, despite being built on ‘soft attributes’ such as communication and trust, it must also be bound by a contract that serves to protect both parties and ensure that a certain level of service and loyalty is met. Having this in place provides a level of comfort and a reference point from which to base the relationship. It is important for any successful supplier relationship to have a meaningful contract in place that stipulates the commitment from both companies to the ongoing supply relationship. If there are any price, shipping or ordering preferences, then they should be brought up at the time of generating the contract. Particularly when it involves changing variables such as price, a contract ensures that variables are agreed upon by both parties. This provides a level of assurance, which is essential to forecasting and planning.
A healthy supplier relationship must be based on effective communication. For it to be effective, the communication must be clear, reliable and must lend itself to easy interpretation. A handy tip is to ensure it is always in writing with a paper trail so that not only can both parties be protected in the event of disagreement, but also having important messages in writing often allows them to be more easily understood. Good communication is also intricately associated with respect and honesty, both of which are fundamental to all commercial relationships.
A mutually beneficial supplier relationship
Relationships rarely last and ensure mutual satisfaction if only one side stands to benefit. Therefore, when cultivating supplier relationships seek to always make them mutually beneficial. Your supplier may well be benefitting from your custom and therefore should be grateful for the relationship, however it is useful to identify ways in which you can benefit them beyond this, such as providing as much notice as possible for orders, meeting minimum order volumes or exceeding them and paying bills promptly. Likewise, if you are a supplier, seek to supply items early, provide loyalty discounts and understand how better you can meet your customer’s needs, even those not yet voiced. It may also be a case of recommendations for certain services or products to each other’s customers; forming alliances can be extremely helpful in the business world!
Strategy, measurement and reward
SRM can be considered a business strategy of the company and so should be carried out carefully with steps in place to ensure its successful implementation. It also is helpful if all levels of the organisation comprehend the vitality of not only your customers but also that of your suppliers. Everyone must endeavour to meet their order requirements or be helpful to the supplier in every way possible. Without your suppliers and thus your product, your company cannot survive!
Just like all business goals, they should be broken down into a number of steps that are realistic and achievable. These achievements should be measurable and exceeded expectations should be rewarded accordingly. This is all part of continuous improvement, another vital aspect to business success.
A supplier relationship can be an important one that outlasts good and bad times, providing security when the company needs it. Do not underestimate the vulnerabilities of the company and the need for outside ‘help’, expertise or product. Understanding the value of other companies to your own and how they can benefit you can be extremely useful for continued success.