A certain company, Z (name redacted), was criticized publicly for failing to pay its suppliers on time. It took them an average of 68 days to pay off as many as 60% of their invoices. This behavior is one of many examples of poor supplier management which could severely impact a business relationship with its suppliers, resulting in a disruption within its whole operations.
Deficient supplier management could lead to supply interruptions or discontinuities, vendor fraud, ethical and humanitarian deviations, environmental incidents, and financial failure among many. For that reason, it is important for both companies and their suppliers to remain trusted and responsible with each other, starting from maintaining a positive supplier relationship.
The benefits of positive supplier relationships
Suppliers are strategically critical to a business’ success, and many companies seem to forget about it as they tend to focus more on sales, profits, and customer relationships. Supplier relationships, in fact, also need to be on the top list of business priorities because a strong and loyal bond between a company and its suppliers produce significant benefits that can elevate a business.
1. Less money spend
Building a good relationship with suppliers could help a company in terms of saving money through interesting deals, discounts, and incentives—giving the company an advantage in the competition. In addition, it will be less likely for the company to spend money on unexpected costs from production mistakes and delays by developing a positive supplier relationship
2. Increased efficiency and continuous operational improvements
Having a good supplier relationship prompts the suppliers to prioritize the company they have a good relationship with. They would work most diligently to deliver in high-quality to satisfy the company and provide the needed support when the company needs it. As a result, there would be improved efficiencies and less supply chain disruptions in the operations
3. Greater insights and visibility across supply chain
To create a strong, loyal supplier relationship, a company needs to integrate the proper technology, processes, resources, and tools. This integration, and improved supplier relationships that come along with it, could produce greater visibility into supplier performance, which includes service levels, risks, and behavioral patterns. It also opens the doors to beneficial opportunities for both parties
Ways to maintain positive relationship with suppliers
Having good suppliers is a blessing, and the last thing we want is to lose them. With them gone, it would be hard to find the same ones. It would also be a downgrade to find new suppliers with lesser quality or not a pleasant to work with. Therefore, it is crucial to preserve their loyalty.
Two approaches to supplier relationship management that a company could take are reactive approach and strategic approach. When setbacks occur, a company figures out the strategies to improve supplier relationships with the reactive approach, while strategic approach is applied at the very beginning of supplier management practices, which prepares the company better in preventing any issues to arise.
Before starting a supplier relationship management, a company must understand two things:
1. That suppliers are “partners”, not just vendors
Suppliers are an integral part for our business to succeed. Take time to learn about them and see how they work in person. Be aware of their needs and concerns as well as keep them informed about any relevant progress. It is also advised to know how much percentage of their business is represented by our business. It would help us aware of how important we are to them
2. That suppliers are a reflection of our business
By learning about the suppliers, we will gain information on their values, principles, conditions, and how they work. Be sure to work with ethical suppliers that are within price requirements, have the right experience, capable of meeting orders, and financially stable. Doing business with the opposite will put our company at risk
Now that the knowledge on suppliers has been obtained and understood, a company could start implementing strategies to strengthen positive supplier relationships. Here are some ways to be considered:
1. Use technology for better supplier management
There are technologies that could ease supplier management in various ways, such as supplier management systems to organize information about suppliers and keep track of them and cloud-based rebate management software to share deal information and collaborate. These technologies could be utilized to provide transparency of any trail of activities to avoid any misunderstandings
2. Contribute as much as the suppliers do
As we demand our suppliers to improve a component or product, we have to be willing to contribute to the cost of improving the product or provide help to develop their tech to add new capabilities, solve problems, or bring innovations. Collaborate to achieve more efficiency and to lower cost
3. Be fair
Treat the suppliers reasonably based on the requirements and agreements stated in the contract. It is vital for both parties to understand and uphold their obligations to build a positive supplier relationship. One of a tried and true ways to achieve it is by making payments on time, show the suppliers that the company is a reliable business partner
4. Address any issues and challenges
Working with good suppliers does not guarantee a constant smooth supply chain process. There will be times when issues come up, threatening the supplier relationship. Rather than sweeping the issues under the rug, the company should move proactively to address them. Arrange a schedule to address them with the suppliers with solutions in mind, then ask the suppliers’ input to determine the next step
5. Prioritize communication
Remember: vendors are partners. They are people, and the more we build a personal relationship with them, the better we will do. It is important to be transparent from the beginning to build loyalty. Clearly explain our projects, the process, and possible outcomes as people are more willing to engage on things in which they have their influence over. Through open communications, we would also be able to identify possible risks and find the best ways to overcome them. Additionally, remember to refrain ourselves from overpromising and work out on finding an agreement that is beneficial for both parties
6. Be consistent in being reliable and acting with integrity
The most important thing of all is to be consistent. Through consistency, we are ensuring our partners of our competence and reliability. That way, we will gain their trust and loyalty. They would also be more willing to help us back to overcome any issues that spring in the future
BMJ attempts to maintain positive suppliers relationships
Having good relationships with suppliers is one of the most important things that BMJ attempts to continuously maintain. One of values that we regard highly is mutual integrity, and we try to build it through consistency and commitment to stay honest and be reliable. By establishing mutual integrity, we are able to gain trust and loyalty from our suppliers, which in turn will be willing to support us back in times of need.
BMJ strives to build a long-term relationship based on loyalty between company and suppliers, and here is a list of what we do:
a. Give honest feedback and appreciations where they are due
b. Maintain good communication with each other and communicate periodically
c. Pay on time based on the deadline in SPK
d. Conduct a discussion together to find solutions and understand each other’s needs and policies
e. Provide clear and complete data information or requirements needed
The positive supplier relationships that BMJ has established with our suppliers have given various benefits for the company, such as:
a. Get more competitive price
b. Easier to purchase
c. Suppliers respect company policies more and will give their best to be always on time with shipping time
d. Suppliers will ready to help if there is any emergency through a gentle agreement
e. Get Term of Payment for long-term
In the end, suppliers will be very loyal when they are happy and satisfied with the collaboration of the company they work with. They are willing to prioritize the company other than the others, remain loyal, and give the best of services that benefitted both parties.