Six Steps to Build Effective Supplier Relationships

W.Edwards Deming , an eminent author once said-“You must have a supplier relationship of constant improvement.” Managing your supplier relations in a continuous way is one of the key processes in attaining successful outcomes and bringing long-term value to both the supply chain and organization. But how can you build effective supplier relationships? In this blog, we discuss about the importance of supplier relationship management and some tips to build effective and reliable relationships. 

What is Supplier Relationship Management? 

Supplier Relationship Management (SRM) is a structured process of assessing different vendors that are engaged in the process of supply of materials, services, and goods to a company. This process helps organisations decide which suppliers have a propounding impact on the success and growth of the organisation. The supplier management process can also be justified by saying, that it is one of the most critical approach to ensure how fruitful your supplier relationships with a particular supplier are turning out. It also enables the  associates of the company to get notified about those suppliers who are lacking in their performances. 

• The administration of supplier relationship management is performed by supply chain professionals who keenly involve in dealing with suppliers in the field of operations, procurement, and project management. In order to have an integral supplier relationship management system, you also need to have a powerful and secure supply chain management system. Disruptions in the supply chain can cause disturbance in maintaining efficient supplier relations.  

• Today, with covid-19 pandemic having caused much disruption in supply chains globally, supplier relationship management and risk management take the centre stage more than ever. Supply chain professionals are keen to adopt procurement and supply chain risk management software that could help them manage their suppliers more efficiently and give visibility into their supply chains to prevent disruptions.

What are the benefits of SRM?

The supplier management process is an enduring process, which when implemented the right way can aid several benefits including strategic partnerships with suppliers leading to supply chain stability and cost-savings . Good supplier relations can help organizations to achieve these key benefits: 

• Greater efficiency 

SRM reduces the communication gap between the enterprise and the vendors. It presents the business goals effectively and eradicates redundancy throughout the process. 

• Increment in revenue 

Efficient supplier relations can help achieve remarkable revenue objectives for both buyer and the supplier. It offers a wide spectrum of market opportunities with greater visibility of the potential market risks and growth. 

• Facilitates a continuous improvement process 

The strategy of supplier management software is to engage both vendor and the buyer in a long-term process of persistent improvement. This cycle of improvement ensures that suppliers meet the performance criteria and continue to adopt substantial approach adhering to buyer organization’s goals, services or products.

Embracing strategic supplier management techniques 

Managing your supply chain is not limited to keeping track of your suppliers and their inventories. In fact, it also involves identification and maintenance of all the interactions with the vendors in a well-planned, calculated and strategically stable way.  

Strategic supplier management focuses on cultivating long-term relationships especially with those suppliers who are critical to the organization. The process aims at extracting the best from its suppliers as well as employees.  

The critical parameters of strategic SRM are: 

• The process should be mutually beneficial to both the parties i.e., the buyer and the supplier. 
•  It should be governed under a well-defined structured model. 
• Strategic SRM is based on mutual trust between the key partners and their accountability towards each other. 
• Involving strategic alignments on multiple business processes, deign, delivery and tools. 

Quantifying the strategic sourcing framework, organizations need such management software that could adhere to strategic supplier management.  

How to develop effective and reliable supplier relations? 

Now that we have understood what is SRM? and how it is beneficial for procurement organizations, it is important to understand how to establish active strategies for maintaining efficient supplier relations.   

Enterprises are constantly working on strategies to decrease their supplier management costs, and at the same time they need to keep track of the supply chain, revenue generated, risks and reputation of the company. 

To develop excellent supplier relation strategies, companies need to improve and make endeavors on cross-functional requirements involved in the procurement and supplier management process. The following steps help organizations accomplish competent supplier relationships: 

1. Develop agreement 

The first step to have an efficient supplier relation is to generate a detailed agreement. This agreement should be designed after completing all the negotiations between the vendor and the buyer. Negotiation is a critical milestone in supplier relationship management process.  This step requires the research team to conduct a flawless research on the supply market as well as the supplier.  

At this step, both the parties raise different agendas one by one. The consequences on the business are discussed keeping mutual acquisitions in place. Everything is listed in the agreement including, terms and conditions of deliveries and payment, prices, description of services and timelines. A well described supplier relationship document reduces the chances of any disagreement between the suppliers and the purchaser.  

2. Select the best from the rest 

The second step involves, selecting the suitable supplier according to the requirements to the company. The sourcing team sets an evaluation criterion, according to which all the suppliers are assessed. The selection process can be performed manually or by using selection tools. If the selection procedure is performed manually, then step by step the suppliers are sorted out and narrowed down to final contenders. Or else if it is observed using automated tools – eSourcing/Strategic Sourcing software, then many suppliers can be processed in a short duration and manual redundancy is removed. 

3. Manage your strategies using a good supplier relationship management tool 

Enterprises can make their supplier management process easier by investing in a superior Supplier Relationship Management (SRM) solution.  Current market scenarios have a variety of supplier relationship management software that could be used according to the company’s requirements. An SRM tool presents a range of automation processes that could enhance the end-to-end supplier management processes. Managing a list of suppliers is a tedious task. SRM software have the capability to intensify and fasten the procedure of supplier management by automating complex and time-consuming processes like supplier onboarding, compliance verifications, performance monitoring and management, risk management and so on. Strategic Sourcing solutions like MeRLIN offers integrated supplier relationship management solutions. 

4. Work on the communication channels 

Always keep your organization and your suppliers on the same path. Any communication mishap could some time lead to disastrous results. Having an open and powerful communication channel is an important step for developing an effective supplier relationship.  

To enhance collaboration, enterprises can send invites to their suppliers for business and cultural events, seminars, update information about new requirements and products and can also involve them in strategy meetings and encourage co-innovation with suppliers. These methods not only decrease the communication gap between the vendor and the buyer but also generates successful business relationships. 

5. Keeping track of the performance   

Enterprises should maintain record of the supplier performance. Evaluating supplier performance is one crucial task. The supplier relationship management software segments different suppliers based on how they perform – based on quality of items/services delivered, timeliness of delivery, completeness of orders, regulatory compliance, costs and so on.  If a particular supplier’s performance is not as expected, then the supplier management teams need to analyse the cause behind the poor performance and take corrective measures to improve it. If a supplier has the resources and willingness to support the company in spite of their poor performance, procurement organizations can work on supplier development programs so that the suppliers can grow their capabilities to match the organization’s requirements. Supply management professionals can think about how they could improve the supplier’s performance or what better supplier management strategies could have been used.  

6. Always represent as a good customer 

 A good organisation consistently maintains positive relations with its vendors and presents valuable feedback to its suppliers. This includes all practices like, bill payments, requirement updates, leads distribution, opening communication channels. 

Conclusion 

A stable supplier relationship helps organisations to establish a strong a successful path of communication, improvement, innovation, and risk measurement with the suppliers. Having the right tools in place to manage suppliers and establish consistent communication with them can simplify the overall supplier management process and help you build more effective relationships with your suppliers.  By using supplier management software, the businesses can make functioning of supply chain process swift, easy and secure.  

MeRLIN is an end-to-end strategic sourcing solution with integrated supplier relationship management software for streamlining the process of strategic supplier management. It’s unique features help in managing the supplier lifecycle, calculate and track supplier performance, use analytics to gain insights on suppliers and assess risk factors. It offers an intuitive and secure platform where buyers and suppliers can collaborate seamlessly.