Building strong, positive relations with your suppliers is crucial to the success of your business. The relations you build with your suppliers can be a competitive advantage for your business or a major setback – but you have the power to decide which way it will go.
Companies focus a lot of their efforts on building good relations with their customers, keeping them happy and wanting to buy more and more of their products and making sure every step along the way that their customer satisfaction level is high. However, shouldn’t they be focusing on building good relations with their suppliers as well?
There are many reasons why you should be maintaining good supplier relations, from getting better deals in terms of costs and payment terms, to building lasting partnerships that ensure success and compliance for both organisations and long-term saving opportunities.
An important part of maintaining good relations with your suppliers is having the capacity to evaluate the risks associated with your suppliers, determine which suppliers have the greatest impact on your performance and ensuring they are performing well.
In today’s global economy, companies have a wide range of suppliers to choose from. Therefore, it is important to pay extra attention when creating your supplier database and making sure your suppliers adhere to similar business values and compliance standards and don’t engage in unethical behavior.
Once you have decided on your supplier database, you want to cultivate the relation with your suppliers. There are a few principles when it comes to building good supplier relations. These are our top 5:
1. Communication is key
In order to build a good relationship, whether it’s a personal or a business relationship, communication is key. Make sure to maintain strong and regular communication with each of your suppliers. Keep them up to date with any strategy changes and plans that will have an impact on them. When communicating with your suppliers, make them feel like they are part of your company’s success.
To achieve good communication with your suppliers, there needs to be established channels and a structure that facilitates effective communication and transparency between both parties. Having the right tools in place will facilitate both internal and external teams to share documents and relevant information.
2. Respect payment terms
Finding the right suppliers for your organization is not an easy task. This is why you should make sure you don’t lose your strategic suppliers. An important aspect to ensure this doesn’t happen is making sure you pay your suppliers on time. This will show them that you are a reliable, valuable customer. If, for any reason, you cannot respect the agreed upon payment terms make sure to inform your suppliers on time.
If you are facing other issues, like controlling spend, AP automation solutions can help you easily match payments with invoices and reduce errors.
Respecting your suppliers’ payment terms will make them more likely to grant you favors in the future – you might need to rush an order from time to time, or might want to renegotiate your payment terms. Being a trusted customer, your suppliers will be more likely to help you out.
3. Build detailed supplier relationship agreements
Any business relationship implies responsibilities for all parties involved. If you are buying from a vendor on a regular basis a Supplier Relationship Agreement is a must. This should be a transparent and consistent document containing everything that is expected from your partnership, your rights and responsibilities, including service description, price, delivery and payment terms etc.
The Supplier Relationship Agreement should meet both parties’ needs and should result in less uncertainty and fewer conflicts between your business and your supplier.
4. Make the most of technology
As we have seen above, the ‘human side’ of your business weighs quite heavily in maintaining a good relationship with your suppliers. However, in a world of technology advancements we cannot overlook the power of procurement systems when it comes to supplier management.
If you already have a procurement system in place, you will want to focus your efforts on building a strong supplier enablement strategy. Procurement systems are most effective when the majority of spend and suppliers are flowing through it. Without a focused supplier enablement process your organisation may be missing out on some significant savings and benefits. You can read more about creating a supplier enablement strategy here.
Another use of technology for improving your supplier relations is having a supplier relationship management (SRM) tool in place. This gives you complete and unrivaled insight into your supplier base, giving you a detailed image of how your supply chain is impacted and making it simple to minimize risk.
5. Focus on building strategic partnerships
The ultimate goal for your supplier relations should be to transform your suppliers into strategic partners. Communication, mutual respect of each other’s needs, a well-defined relationship agreement and using technology to streamline your supplier relationship management process are all the ingredients you need to turn your suppliers into strategic partners, and of course, the will to do so. As a business you need to recognize the value your suppliers bring to your organization and nurture that value.
Building effective partnerships with your suppliers is a skill that can further accelerate improved performance and sustained growth in the industry.
Want to learn how your organization can improve its supplier relations? Get in touch with our procurement expert today.