Proactively Managing Supplier Relationships

Anyone who has worked in the supply chain space for any length of time will know just how important relationships are to the business of procuring products and/or services from suppliers. Keeping relationships happy, healthy, and communicative is the best way to ensure you are getting the best deals and the best service from suppliers.

This is especially true given the turbulent times in which we find ourselves. With so many external geopolitical forces such as the COVID-19 pandemic and the Russian invasion of Ukraine placing incredible pressure on supply chains, the need for strong supplier relationships has arguably never been more keenly felt.

However, it’s astonishing how often these relationships are established and the left to stagnate. Maintaining supplier relationships should be an ongoing and proactive process which both parties engage with in the spirit of achieving the best results for all involved.

Proactive Supplier Relationship Management

In the past, procurement was very much a simple transactional relationship – a business requires a product or service to perform its core function and the procurement department acquire it for the best price possible – however, these days it is far more ingrained in the overall strategy of the organization.

Relying on multiple suppliers or just using the most convenient one available can make it difficult to meet these objectives in an ongoing and consistent manner. If one only focusses on the passive acquisition side of procurement and neglects the relationship building aspect, it will become increasingly difficult to maintain the steady flow of goods and/or services between the two organizations and reduce measurable value over the long term.

However, proactive supplier relationship management seeks to overcome these obstacles by moving away from a simple transactional relationship which doesn’t look beyond the immediate supply needs of the organization and develops more meaningful partnerships. These proactive relationships maintain more consistent communication which helps you to make timely decisions and minimize cost, manage potential supplier risks, as well as ensure high-quality deliverables, adding more value in the long term.

"In the past, the procurement discussion has been left until the last minute,” reports Procurement Mag. "This often resulted in higher costs, low-standard deals, poor collaboration, and limited leverage, all of which stunt innovation and sustainability. Empowering proactive procurement ensures earlier engagement with customers and suppliers, lower costs, improved sustainability across the supply chain, greater innovation and a quicker route to market, which gives you a huge competitive advantage.”

Benefits

The benefits of proactive procurement relationships are clearly many and include, but are not limited to the following:

• Reduce risks: Regulatory compliance, hidden spend, unforeseen expenses and more can all result from reactive vendor management. However, with a more proactive approach to relationship management, these risks can be mitigated through effective communication and process consistency.
• Cut costs: With the consistent flow of information between supplier and buyer, additional costs can be more effectively managed. Stronger relationships also provide fertile ground for negotiating better deals and contract terms.
• Reduce errors and inefficiencies: Without data being siloed at either the supplier or buyer end of the process and with the flow of information between the two being prioritized, errors and inefficiencies can be spotted quickly and addressed before they cause problems for either stakeholder.
• Monitor and optimize vendor performance: Measurement is key in the data driven world in which we live and, again, the removal of data siloes can help all stakeholders in a supply chain better measure and optimize performance for ongoing organizational effectiveness.
• Manage brand image: With the increasing complexity of global supply chains, it’s harder than ever to ensure brand safety. With proactive relationship management, it becomes far simpler to identify vendors with ethical or legal concerns and either remove them from the process or work with them to improve their practices.
• Forge strong vendor relationships: It is important to have a mutually beneficial relationship with vendors. Such loyal relationships can help you rely on them in uncertain times to ensure there is minimal risk or disruption in your supply chain.
• Improve onboarding: With centralized vendor information, you can aim for fast-track and error-free approvals. The faster onboarding translates to a reduction in unnecessary delays, and a quicker procurement process.

"In the aftermath of the coronavirus crisis, the trend across procurement departments has switched from reactive to proactive status,” explains Scoutbee. "Companies have recognized the need to seek out supply chain improvements in order to anticipate disruptions, rather than reacting to a crisis when it hits.”

Final Thoughts

Proactive supplier relationship management will help your supply chains function more efficiently and effectively than ever before and give you the ability to mitigate all the risk factors laid out above. Building those relationships today will make for a more powerful organizational structure tomorrow.