Whether you are an ecommerce retailer or a regular stockist, supplier relationship management should hover near the top of your Must-Dos list. According to recent reports by Efficio Consulting and PricewaterhouseCoopers, very few companies are successfully implementing supplier relationship management.
This is a little alarming because a solid supplier relationship can have long-term benefits for businesses.
Finding reliable suppliers isn’t easy. Since they play a critical role in your business, it’s only right to treat them as a partner. The kind of relationship you have with suppliers can affect sales and determine the growth of your organization. You pretty much depend on them for your bank statement.
Here are some reasons why you should work on improving supplier relationship:
Renders You Competitive Edge
There are several ways to get ahead of your competition – offer more competitive prices on your products, provide higher quality items and render more reliable customer support. Guess who can help you accomplish these?
Supplier relationship management allows for planning and carrying out of strategic plans between both parties. You can benefit from your suppliers’ expertise because they can work with you in identifying key areas that need improvement, contribute towards product development, and modify current strategies to draw sales and increase market share.
High Quality Products Delivered On Time
A great relationship with suppliers will ensure that products delivered to you are top notch and shipped way ahead of schedule.
More Efficient Operations
In business, time is money. If the shipment of raw materials is delayed by hours, it keeps you from producing output, resulting in you falling behind schedule with fewer products to sell. Proper supplier relationship management will allow your supplier to understand how crucial it is that they deliver quality products on schedule. In addition, they may even go the extra mile and improve their products and services to help you improve your business.
Providing products of high quality on a timely basis naturally goes towards attaining customer satisfaction, and your customers expect nothing less.
Saves You Money In The Long Run
The best part of having a good supplier relationship is saving money on production costs and increasing return on investments. It would be a breeze to negotiate for discounts or more favorable payment terms. In addition, you can seek financial support from suppliers, now your trust business partners, in the form of credit, loan or investment in your business.
Developing reliable relationships with suppliers is not rocket science. All it takes are the few simple steps below:
Keeping channels of communication open and robust goes a long way towards keeping you and your suppliers on the same page. Transparency in each others' operations also fosters trust and understanding in the partnership. In addition, conflicts can be resolved early on with ease if both parties are willing to listen and put forth honest and constructive feedback. Being goal-driven will keep you focused in your communication and keeping discussions professional.
To add on, suppliers are extremely busy and caught up with thinking of setting prices for goods, overcoming warehouse barriers, and increasing sales volume so it's best to keep your messages for them short and to the point. Considering just texting or dropping them memos on WhatsApp instead of sending lengthy emails - they will thank you for not wasting their time.
Furthermore, it also helps to literally 'speak their language'. For example, a lot of suppliers for products sold in Asia are from China (no surprises there), so as a retailer, there's a chance you can get better rates if you could negotiate in Mandarin with your Chinese suppliers. Get to know about their culture and starting things off on the right foot with some Chinese hospitality also aids with the negotiation process.
A Solid Agreement
Before plunging into a supplier-retailer partnership, make sure you and your suppliers agree on a clearly crafted contract where terms are defined and responsibilities drawn out plainly. Don't be shy or afraid to challenge conditions and clauses. Instead, being truthful and straightforward right from the start projects a no-nonsense image on your part and suppliers are more inclined to open up and take part in your plans. Also, negotiations are good opportunities to manage expectations and align objectives while mapping out plans for the future together.
A Supplier Relationship Management Program
Like any other aspect of your business, you need strategies if you want a well thought out, structured relationship with your suppliers. Treat them like any partner or important stakeholder of your business, and craft out steps as to how the both of you can create a successful 'joint venture' together. Investing time and personnel into supplier relationship management is not futile.
Some points to get you started will be to determine supplier relationship management goals (best if they can be measurable and achieved within a time frame), list out activities and process to attain goals, establish roles, and so on. This is akin to doing up an internal marketing or sales strategy for the year - start of with goal-setting and research before progressing to brainstorming and ways to measure objectives.
Live Breathe Eat Supplier Relationship Management
The program should then be communicated to everyone in the team tomaximise benefits from the process. Also, it is best for the the plan to be integrated into the whole organization and its day to day operations so everyone (even those outside of the procurement team) can contribute and get involved in improving customer -supplier relationship.
Understand Your Supplier
Don't always view the partnership from your end of the bargain, switch perspectives and think about what's in it for your suppliers from time to time to gain further understanding of the relationship. Also, your bargaining power increases when you know what makes your suppliers tick. However, be mindful and strike a balance in using it to your advantage without abusing it.
To flesh out this point, here's an example: When suppliers are higher up in the supply chain and closer in relation to the manufacturer of the brand, you need to respect their prices more. They wield more control in the industry so it is best not to negotiate too aggressively and come across as compromising their margin for your own profit. On the other hand, for the middle man and traders who are lower down in the supply chain, they are more open to negotiations on product prices because selling at high volumes is their main concern. They are fine with getting lower margins and have not much allegiance towards a particular brand.
Lastly, being a reliable customer can be as simple as making payments on time and putting yourself in your supplier's shoes. The key phrase here is 'mutual respect' - it gets you so much more in return in the long run.