Reliable suppliers are at the foundation of any successful supply chain. Finding them can be difficult, but maintaining a positive relationship with them is more important than ever. The problem is that many organizations approach their suppliers with the wrong mindset.
They believe they should have all the power, or that the relationship should be purely business. Neither of these things make for an ideal long-term relationship. Here are ten tips for establishing a smarter, healthier, and long-lasting relationship with your suppliers.
1. Set Detailed Expectations
Strong communication is key. Setting the stage for your business relationship will ensure that everything runs smoothly. Before you begin working together, sit down to identify the expectations of both parties.
Your procurement team should provide service levels and key metrics in any and all agreements. Similarly, the supplier should share their preferred methods of billing and payment.
This is also a perfect opportunity to outline expected volume, lead times, and security measures that you expect as part of your business together. Finally, spend time outlining the incentives for strong performance and penalties for errors on either side of the equation.
Throughout all of this, remember to accept accountability for your business. If you fail to keep up your side of any transaction, or the business is rushing too many orders, this should be addressed in the same way you would approach an issue with the supplier. Setting these ground rules will ensure that you have a strong foundation for communication going forward.
2. Forge Personal Relationships
Simply doing business together is fine, but the most successful business relationships take into account the people behind the business. This can be as simple as sending your suppliers a message on birthdays or holidays wishing them well.
If you meet them in person, strike up a conversation about their family and ask how their lives are outside of work. It doesn’t need to be complicated, but having a rapport outside of business transactions elevates the relationship beyond simple transactions.
This not only builds trust between you and your supplier, but it also makes it easier to approach stressful topics like issues with supply or other unforeseeable circumstances.
3. Share Information Constantly
Establishing communication channels allows you to have an open line between you and your supplier. There’s no denying that the supply chain is an ever-shifting beast, so sharing relevant information is extremely important.
Changes in lead times from the suppler or shifts in demand should be shared immediately to ensure there’s no excess inventory or loss of business due to low stock.
When issues inevitably arise, this willingness and ability to share information between procurement and your supplier will be the essential factor in limiting damage to either side of the supply chain.
4. Keep an Eye on Your Competition
Modern supply chains are extremely competitive, and security is more important than ever. A smart strategy is to find out what other companies your suppliers work with. If they supply your competition, it may be best to find another option.
Similarly, it’s wise to have the supplier sign an NDA regarding your products and designs. While a document like this may seem like a betrayal of trust, it’s simply there to establish an understanding while also protecting your I.P in a world there these things are vulnerable to theft.
5. Make Your First Order Significant
First impressions are always important in any business relationship. When you agree to work with a supplier, make sure the first order comes fast and is paid for promptly.
In some cases, it can also be beneficial to fly out and meet with your supplier in person as they are finalizing the first order. Paying them in person and celebrating the completion of the first order is also a great way to set a positive first impression.
6. Avoid Common Mistakes
There are several basic mistakes that can damage a relationship, especially in the early days of doing business. A major one is late payments. While this is a possibility, communicating any issues with your supplier can help you reach a solution before it becomes a problem.
On the other side of the coin, late deliveries or miscommunication surrounding product specifications can quickly lead to tension between you and your supplier.
If you notice a drop in quality or several late deliveries, don’t assume the problem will fix itself. Identify the underlying issues, whether it be a lack of detail in your parameters, or an overload of demand on the supplier, and explore your options.
7. Consider Both Sides of The Transaction
Far too many organizations approach their strategies with a focus on what the supplier can do for them. A supplier is a business like yours, so the perspective should take into account both parties.
Think of it as a partnership instead of a business transaction, and you’ll quickly start to see opportunities that leverage positive outcomes for both sides.
What unique options does the supplier bring to the table for your business? Do they have competitive pricing? What about specific components you can’t find anywhere else?
Similarly, ask what your business brings to the table for them. Are you reliable and consistent? Do you place large orders that drive their profits? Look for solutions that benefit both sides and you’ll find that the entire relationship benefits as a result.
8. Establish Risk Mitigation Strategies
Never ignore potential breaks in the supply chain. Risk mitigation may not be a fun topic of discussion, but you and your supplier should have strategies in place to handle a variety of scenarios.
Shortages and the ongoing trade war are both very real factors, but consider other things like natural disasters or issues on the supplier’s end. How will you work together in situations like these to limit the damage?
By discussing this early in your relationship, you won’t be blindsided by issues when they inevitably arise.
9. Revisit Terms as Needed
Your business evolves as time goes on. The supply chain shifts and changes to meet the needs of businesses around the world. Even your supplier will adapt and shift their strategies constantly.
Given these things, it’s not reasonable to assume that your original terms will last through the years. Sit down with your supplier at least once each year to review and revisit the terms of your agreement.
There may be an opportunity to increase business for them or drive more value from your purchases. New designs could reveal enhanced or more efficient components that your supplier can supplement for you.
Ultimately, you won’t know what is possible unless you open up a discussion surrounding your strategies and the changes in your industries.
10. Leverage Technology to Benefit Everyone
Disruptive technology is the backbone of digital transformation in the supply chain. Organizations are embracing new software solutions, and cutting-edge tech like machine learning, artificial intelligence, and IoT.
These things offer countless benefits for the supply chain, but more importantly, they open up opportunities for you and your suppliers. Visibility is something every company wants, but achieving it is far easier said than done.