Without your suppliers, your business wouldn’t last long at all. How well you manage relationships with your suppliers directly influences the success of your business.
With strong supplier relationships, you can maximize profits by optimizing production and minimizing supply chain costs. You can even take advantage of your suppliers’ knowledge of market innovations and changes in the industry. Managing suppliers well is a complex task, but it starts with using the best suppliers, taking full advantage of the tools at your disposal, and educating your employees in supplier management techniques.
1) Use Quality Suppliers
When it comes to finding the best suppliers for your organizational needs, strategic sourcing is your friend. Potential suppliers are more than just possible transactional partners. They’re sources of value that could put your organization at a marked advantage. Quality suppliers can give your organization access to the best supplies and products, but they can also give you access to a level of market knowledge and insight that you wouldn’t otherwise be privy to.
Choosing a high-value supplier requires more than looking at the price of their goods or services. Look at their capabilities and capacity to see if they’re capable of meeting your needs. Talk to other organizations that work with them to see what they’re like to work with. Consider your past interactions with each supplier, if you have any. Put expectations into writing and monitor the supplier relationship to make sure they’re keeping up with their end of the bargain, as well as to strengthen and enrich the supplier relationship as it deepens over time.
2) Manage Supplier Information Well
At every stage of the supplier relationship, you will have a pile of data that needs to be organized and tracked. Quotes, contact details, contracts, certifications, performance ratings, remittance details, capabilities, capacity coverage, risk scores, locations — all of it will need to be catalogued and managed. When you do a good job of managing supplier information, however, you can use it to drive collaboration. All information should be centralized into a master document that all interested parties can use as they manage the relationship going forward. Round out your view of your suppliers with third-party information, if you can get it.
3) Use Data Analytics and Supplier Management Tools
When you use supplier management tools and technology, you can access a range of new possibilities that weren’t available in the old days, when everything had to be done tediously and by hand. Save time, cut costs, and eliminate waste by automating inventory tracking and orders. Onboard suppliers, manage supplier information, track supplier performance, collaborate with stakeholders (external and internal), and, in general, improve your supplier relationships. Perform spend analysis to figure out where your money is going, and where you can cut costs — choose a supplier management tool that collates all of your spend data in one location. Group and sort expenditures to get a big-picture look at categories of spending within your organization, and work with suppliers when necessary to bring those costs down.
4) Group Suppliers Based on What They Provide
Supplier segmentation, or categorizing suppliers based on what they provide and their importance to your organization, is one of the most powerful tools you can use to manage supplier relationships. Supplier segmentation lets you sort suppliers into strategic, important, and transactional categories. By knowing which suppliers are most important and pose the biggest risk to your supply chain should the relationship sour, you’ll know which suppliers you really need to work with to keep your business running smoothly. You can use this information to tweak your relationship management strategies for each supplier.
5) Train Employees in Supplier Management Techniques
According to a recent survey by Deloitte, procurement teams are facing more complexity in their work than ever, and at least half are struggling to use supplier management tools to assess risk in supply markets, among other things. It’s more important than ever that employees receive ongoing education and training in supplier management techniques and tools to help them build and strengthen their skills in the field. Your employees want to do well — all you have to do is provide them with the training they need to develop those skills and competencies.
When it comes to succeeding in business, managing your supplier relationships well can play a huge role. These days, there are plenty of high-tech tools to help. Make the most of what technology can do for your business, and watch your supplier relationships flourish as a result.