There is no doubt that strategic supplier relationship management is one of the most important means to drive competitive advantage for modern multi-national corporations. It is as important to extract the best from key partners as getting the best from employees. Let’s take for instance, companies like Toyota which excelled in supplier management, leading to a competitive edge that converted a small regional manufacturer into the largest automotive company in the world.
Supplier Relationship Management is a complex function; it involves assessment, advanced evaluation and subsequent action planning to continuously optimize long-term strategic supplier relationships. There are various models for Supplier Relationship Management. These models require both parties to have the following characteristics: mutual respect, an understanding of the mutual benefits of the relationship, trust in each other, fairness and honesty. This article outlines some of the strategies which can be useful to improve supplier relationship management:
Foster the right behaviors
Companies should consider ensuring that a supplier behaves in a way which is amenable to the creation of a productive relationship. It is both the responsibility of the supplier and the buyer to foster good behaviors in order to ensure a win-win situation. For instance: opportunistic activities, slow delivery may indicate that the supplier is not sufficiently invested in the relationship.
Get the most out of strategic suppliers
It is important to understand that strategic suppliers are not like conventional vendors. They cannot be managed on mass in e-auctions systems or subject to blanket demands for price reductions. These relationships require time and trust. As such, the essential buyer investment into the relationships should be reciprocated with a diverse array of supplier benefits. For example: in terms of product innovation, risk reduction projects and even re-engineering supply systems can be outputs for successful strategic supplier relationships.
Keeping channels of communications open and strong will help to keep you and your suppliers on the same page. There needs to be transparency in each other’s’ operations to build trust and understanding in the partnership. Moreover, it also helps to understand their language and culture to avoid any communication breakdown.
A Solid Agreement
One of the most essential step in supplier relationship management is to always ensure that you and your suppliers agree on a clearly crafted contract where terms and responsibilities are defined. This should be done before agreeing into a supplier-retailer partnership. Such action will eliminate any conflict or disagreement if any problem occur.
A Supplier Relationship Management Program
Similar to any other aspect of your business, strategies are required for a structured relationship with your suppliers. The key is to treat them fairly and not to abuse the power as a buyer. It is important to determine the supplier relationship management goals which is measurable and achievable within time frame, list the activities and process to attain goals and establish roles.
An effective supplier relationship management Program should include defined processes to manage performance. For instance: involvement at the highest executive level is key to the ongoing success of the SRM program. Executives may only meet quarterly to discuss strategy while lower levels are involved in tactical operations and may interface with suppliers on a daily or weekly basis as appropriate to manage business. Therefore, obtaining inputs from different management level will ensure that the SRM program will work successfully on a day-to-day basis while continuing to evolve and address the long-term goals of both parties.
When establishing an SRM program, training is necessary to educate the organization on its benefits and role in optimizing business operations. Every employee involved must be trained on how to use tools to ensure successful program execution.
Hence, an innovative and engaging training program will greatly help. For instance: At Procurement Academy, employees are trained according to their roles trough modern e-learning tools such as scenario-based training. Such training allows them to experience real job situations which prepares them for any challenges in the future.
Address Any Roadblocks
It is essential to discuss with your suppliers about any possible barriers. For example: communication issues between your sales managers and your supplier’s sales department, incompatible software, relationships with new managers or personnel etc. This is an important step to take as anything that hinders your supplier relationship has the potential to slow or stop production. Hence, you want to avoid this as much as possible by addressing any and all roadblocks up front.
Realize that timely payments are crucial
Paying your suppliers on time will ensure that you don’t lose them. In this way, you will prove that you are a reliable customer and that you’re easy to work with. If it happens that you cannot make the payment on a date agreed, then inform the supplier as soon as possible with the date on which they can expect the payment. Just keep in mind that suppliers will appreciate timely payments just like you like timely actions on their side.
There is no doubt that technology can simplify the whole process of supplier relationship management. Having a system in place will make it easy to view your suppliers and analyze all of the risk factors. Hence, using SRM technology provides you with full and unparalleled visibility into your supplier base, giving you a detailed picture of what is impacting your supply chain and making it easy to mitigate the risk.
Effective supplier relationship management allows you to make big savings and also leads to big opportunities. The key is to follow the essential strategies which will allow you to develop a lasting relationships with your suppliers. Having a strategic SRM program in place, can help you eliminate supply chain risk, improve supplier services and support, and even increase organisation revenue growth.