What`s the Importance of a Good Supplier Relationship Management
- Written by Chloe Taylor
The business world, plain and simple, is built around flawless logistics. This comes especially true in the present-day globalized economy where bottlenecks and delays in one corner of the world can bring the whole industry to a halt in the other, which we had plenty of opportunities to witness last two years.
Speaking in cold numbers, the recent surveys say that supply chain disruptions can cause a massive 62% drop in revenue which is something all business owners should take into serious consideration.
So, what can one company do to overcome these dangerous obstacles? In some cases, the solution may simply lay in building up and maintaining good long-term relationships with suppliers. Let's see what this option brings to the table for your organization.
Supply chain consolidation
As we could see last two years, global supply chains can be easily disrupted and, for the most part, lack a sense of certainty. Relying on the selected group of suppliers and striking long-term agreements with them brings some sense into this chaos. Also, you always have a good idea about the type, quality, and volume of the goods you are going to get, which allows you to consolidate the supply chain, engage in more comprehensive long-term planning and avoid item duplication.
Discounts and joint business ventures
We have to remember that suppliers and vendors are just as dependent on your money as you are on their goods. In some cases, they will be more than willing to offer lucrative discounts and other perks in order to open up long-term and reliable sources of revenue. As these relationships develop they can lead to joint corporate ventures, shared marketing campaigns, and investments in mutually beneficial projects (large volume orders, warehouse maintenance, etc.)
Strong mutual trust
Trading in a globalized market involves a lot of risks so both buyers and suppliers are hesitant to make expensive transactions without some sort of guarantee. Such situations are usually defused by using the trade finance services where a lender provides assurances to both these parties that the transaction will be carried out to the end. However, in the case of companies and suppliers with a long history of previous deals, such third-party assurances may not be necessary.
Effective problem solving
Greenlighting the shipments without getting a deposit is only one of the situations where mutual trust existing between buyers and suppliers can come into play and speed up commerce. The same factors come into play whenever some of the parties involved in the transaction experience an issue whose resolution requires access to the other party's communication channels, resources, and infrastructure. Demanding such trust in good faith would be near impossible.
Access to premium items
Every company with a sensible client retention strategy keeps some special items in-store only for the most valuable customers. Since supply chains deal with large volume orders that usually sweep the entire inventories these products sometimes can’t even be obtained through any other sales channels. Therefore, you should strongly avoid hopping from vendor to vendor drawn by temporary discounts and put your eggs in the basket that offers the best long-term prospects.
How to build strong relationships with supplies
All things we have covered above demonstrate the tremendous value brought to the table by reaching out and nurturing strong bonds with your company’s vendors and suppliers. But, as you can probably guess, this can often be easier said than done. So, let us quickly cover some of the guidelines that should help you to put these relationships on strong foundations:
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Pay on time – Make this your number one priority even if you need to raise a couple of short-term loans to cover up the expenses. The present-day financial landscape is endlessly versatile and offers numerous possibilities for raising and consolidating debts. The supply chains are not nearly as flexible.
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Be flexible with agreements – Your suppliers operate in the same business climate as your company so they most likely experience the same problems. Showing understanding when such problems arise and going out of the way to make sure they are solved in a mutually agreeable way will present you as a reliable long-term partner.
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Regularly review the agreement terms – Do that even if making the adjustments goes against your immediate interests. The global market is subjugated to constant changes – holding the supplier in legal ransom to gain some minor benefits can hurt your long-term relations and put you in a very unfavorable position once the agreement ends.
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Try to give plenty of notice – Last-minute orders are a business reality. But, you can't always hope the suppliers will show understanding for the situations when you need to place one. That is why you can summon up a lot of goodwill by using the situations when you are not in a hurry to keep them regularly notified about your future orders. You need to show awareness that you are not the only customer and act accordingly.
We hope these couple of considerations will help you understand the importance of good supplier relationship management as well as devise tangible strategies you can use to meet these goals. In the world we live today, the success of one company often depends on the ability to keep its supply chain streamlined and efficient. Developing a good relationship and strong mutual understanding with suppliers does seem like a strong foundation to build all future efforts upon.
