It’s easy to enter into a business relationship casually. It’s a bit harder to nurture that connection and help it grow. These days, in a climate of geopolitical upset and intense global competition, suppliers and their clients want associations built to last.
In other words, purely transactional relationships are out the door. If you want stability in an unstable world, you need to invest in your supplier connections and build a business coalition that can weather the storm. Whether you’re a buying agent or a supplier representative yourself, here’s a quick guide on investing in, managing and improving your supplier relationship.
Why Is Supplier Relationship Management (SRM) Important?
Consider the current global business environment. With so many variables and unknowns, engaging in business with a new supplier carries an inherently greater risk than working with and growing alongside an existing partner. When both parties have a foundation of trust and a mutual history, they’ll likely be there for each other during difficult times.
How do you know if you need to up your game where SRM is concerned? Here are some of the signs:
- One or both parties’ needs are no longer being met
- Communication is no longer clear, complete or timely
- There are frequent disagreements over service level, pricing, payment windows or quality control
- Fulfillment has fallen behind agreed-upon performance metrics
The goal of supplier relationship management is deceptively simple: Keep product flowing with as few disruptions as possible, at as low a cost as possible.
In reality, many variables feed into this mission. There are several ways to strengthen supplier relationships and management:
- Improve transparency of the supply chain and boost visibility of value partners
- Establish greater control over, and clearer expectations for, all business communication
- Increase mutual awareness of business risks and industry-specific challenges
- Streamline back-office functions wherever possible, including through automation
Suppliers and buyers have several opportunities for strengthening their ties, whether through the addition of value-adding technology or simply recommitting to clearer and more frequent communication.
1. Provide Updates Routinely
The explosion of remote work over the last few years has put traditional communication channels and habits to the test. These days, it’s best to over-communicate — especially in distance-based relationships.
Keeping partners informed is a low-effort way to build trust and confidence in your brand and ultimately strengthen working relationships.
2. Understand Your Partners’ Goals
One of the things that can turn relationships of any type sour is a lack of understanding and empathy for what the other party is experiencing.
The goal of supplier relationships is to be fruitful and long-lasting. It must be more than cold and transactional — your partners’ goals, wins and logistics challenges must mirror yours. You each must know what makes the other tick and understand the peculiarities of their industry to serve them best.
3. Complete a Supply Chain Risk Assessment
It’s time for some trust-fall exercises — figuratively speaking. One of the most important pieces in the supplier relationship management mosaic is understanding weak points in the value chain. Life keeps teaching us that disruptions can come from any direction and threaten business stability.
Work with your business partners to conduct supply-chain audits. Remember to account for compliance risks as well, as the regulatory landscape changes frequently.
Completing this process together will help you identify weak points and bottlenecks that could threaten productivity and help you set plans in motion to comply with future regulations. It may also reveal low-hanging fruit for process improvements.
4. Invest in Supplier Relationship Management Software
Buyers and suppliers have no shortage of options when it comes to supplier relationship management software. The advantage of SRM software is that it coalesces all relevant stakeholder data from the buyer and supplier into a central platform and a single “source of truth” for both parties.
One of the chief pitfalls of managing relationships this complex is wrangling ever-larger databases of quotes, contracts, compliance documents and risk assessments. The right software selection can make it substantially easier and surface insights that might’ve stayed hidden otherwise.
5. Use Software to Automate Purchasing
Technology provides many tools that streamline the buyer-supplier relationship as well. Procurement software is another example. It uses machine learning (ML) to analyze trends from purchasing departments and automatically generate alerts or purchase orders.
The right automation solution takes the pain out of every fulfillment process by creating and sending invoices, matching delivery methods to orders, and approving or rejecting new purchases based on current needs and trends.
6. Explore Blockchain Supply-Chain Solutions
Blockchain as a foundational technology could prove more consequential than any of the products built atop it, including Bitcoin. At a glance, blockchain’s immutable distributed ledger technology doesn’t sound terribly exciting. However, its implications for suppliers and buyers run deep. One of the many ways it improves on traditional enterprise resource planning (ERP) software is the ability to embed far more data into records of custody.
Studies show that ERP provides inventory tools that can unearth expired goods in warehouses. However, meaningful action cannot be taken without a detailed record of why those items aren’t salable. Blockchain provides information about materials and products throughout their life cycles, including their origin, market conditions at the time of manufacture and the status of shelf rotation.
7. Think About Outsourcing Your Relationship Management
It might feel as though outsourcing SRM defeats the purpose of nurturing a relationship in the first place. However, the benefits could be considerable — especially for younger organizations.
Many of us have experienced that first day as the new kid at an unfamiliar school. Who can you trust? Who are the troublemakers? Who’s likely to become a fast friend? Outsourcing your relationship management to a third party gives you access to industry-specific experience and helps you find friends and partners worth trusting and keeping around. Moreover, outsourcing this time-intensive task may save your organization money starting on day one.
8. Unify Around a Shared Mission
Modern supply-chain management can’t be purely transactional anymore. This entire conversation is about making business relationships more closely resemble human ones. Some form of value will always be exchanged — but what’s the relationship built on?
That foundation is typically corporate responsibility. There are many value-focused trade and industrial organizations today, from the Reshoring Initiative to the California Green Business Network. The goal is to help participants find fruitful, mutually beneficial business relationships built on a shared corporate mission.
The strongest relationships are always built on shared values — and research says customers want to see strong corporate citizenship, too. If and when times get tough, you want to find yourself surrounded by people and groups focused on something more than themselves.
Building Relationships Makes Business More Human
Peter Kraljic turned in an essay to Harvard Business Review in the early ‘80s called “Purchasing Must Become Supply Management.” He seemed to foresee the importance relationship management would come to have in the supply chain in the not-too-distant future.
You should have some ideas now for better managing your supplier relationships. These days, with so many variables beyond your control, you want partnerships that stand the test of time.
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