Optimal supplier relationship management requires much more than selecting low-cost, dependable vendors. COVID-19, globalization, and societal shifts have combined to shine a spotlight on how organizations can assure reliable streams of critical inventory, materials and safety and personal protective equipment for their workers.
While crucial, establishing an efficient supplier relationship management process does not have to be complicated. There are several steps companies can implement immediately that can vastly improve their relationships and create the greatest value with their supply chain partners. Active supplier relationship management alleviates the guesswork about whether firms will receive the critical equipment for which they have contracted, whether they are paying too much, and how much maintenance, repair, operations, facilities, PPE, goods not for resale, and other purchases really cost.
These expenses are often spread across thousands of SKUs and purchased from hundreds of wholesalers and distributors. Without a concentrated supplier relationship process in place, customers relinquish all market power to their vendors. Suppliers can easily calculate their costs and estimate the demand each customer will generate, enabling them to set precise prices to maximize their profits. Manufacturers, retailers, and other asset-intensive facilities management organizations with weak or nonexistent supplier relationship management processes have no leverage to force their suppliers to keep prices low and service high. And they may find themselves at the bottom of their vendors’ hierarchy. Preferred customers that build relationships with suppliers are the ones who will receive the facemasks or critical machine parts when the next pandemic or supply crunch hits.
Companies that want to ensure they are at the top of the list for shipments of scarce supplies can begin with several easy wins in supplier relationship management:
1. Make It Personal
Put one person or team in charge of and accountable for supplier relationship management. This point person can build connections with his or her counterpart within key vendor organizations. With a single contact for each stakeholder, everyone knows who to call if a problem arises. Collaborating with each other regularly helps create trust and affinity and increases efficiency through practice and repetition. Soon, the supplier/customer dynamic becomes a partnership, with each looking out for the other’s best interest, as well as their own.
2. Be Willing to Pay for Value
Everyone knows you get what you pay for. Most companies are willing to pay a little more for higher quality products. The same should be true for better service. Building trust and gaining preferred-customer status on delivery schedules, product access, inventory management, and other advantages will prove valuable, especially when there is not enough of an important resource to go around.
3. Know That Money Matters
The above tip notwithstanding, customers and suppliers alike are in business to earn a profit. Strong, vested supplier relationship management practices can convince vendors to unlock bulk discounts and to hold inventory in their warehouses, saving customers money. Of course, they will be more willing to provide those favors to clients to pay on time, helping them avoid the cashflow crunch.
4. Diversify and the Network
Supplier relationship management empowers firms to maintain various service level agreements with diverse partners. Not only does this practice facilitate redundant and emergency sources, but it also creates competition among potential vendors. As they vie for greater shares of your business, the more price and service concessions they may be willing to make.
5. Align Vendors and Mission
Consumers and B2B customers have assumed greater activism and are demanding the companies they interact with take stands on social issues. As a result, supplier relationship management now requires businesses to become more cognizant of how their business practices, products, and partnerships reflect on their brand image. Partnering with the right vendors can promote these initiatives. For instance, if a company advocates for environmental stewardship, it should ensure its suppliers adhere green practices, If “Made in America” is a hallmark, the company should select domestic supply partners and give more weight to those who source domestically. Other positive reinforcement can come from engaging vendors owned by women, veterans, minorities and members of the LGBT+ community.
The time for passive, reactive purchasing and procurement is long past. To succeed, manufacturing, retail, and virtually every other industry must purposefully evaluate, collaborate with, and optimize the performance of the vendors that provide their raw materials, wholesale goods, spare parts, and other critical supplies. SDI offers comprehensive supply chain-as-a-service benefits including supplier relationship management strategies that generate multiple cost-saving benefits. Working with SDI can ensure businesses bring more of the materials they purchase under contractual compliance and deliver insights into tail spend, vendor services, and supply risk. To learn more about the importance of supplier relationship management and the impact it can make on your business, download our full whitepaper.
Discuss your supplier relationship management needs with an SDI professional. Contact us now.