Building strong supplier relationships is key to creating quality products. Why? Because when you have vibrant, strong supplier relationships, you are more likely to get access to new products in development, a higher level of personalized service, preferred pricing, and even special terms. These elements combine to contribute to the overall product quality being higher. When you consider that a report from First Insight found that 53% of customers rate quality as the most important factor when considering a product, high quality products mean more sales and a stronger business.
One of the first steps toward increasing the quality of your products is increasing the quality of your suppliers. When you view your suppliers as relationships versus seeing them strictly as vendors you have made a key step in filling your supply chain with reliable, effective, high-quality partners. The following tips will help you to strengthen your supply chain management and create products your customers will love.
Stick With a Few Key Suppliers
Sticking with a few key suppliers that you build deeper relationships allows you to draw on those relationships when you need them. If your supply chain is large this may seem difficult. After all, on average, a company that spends $1 billion in supplies will have around 3,000 suppliers. That’s a lot of supplier relationships. But the most experts will agree that you are likely spending 80% of your budget with the top 20% of your suppliers.
It’s an easy thing to evaluate. Simply run a spend report for the past three to five years and calculate the percent of total for each of your suppliers. Once you identify your top suppliers you have your list.
This exercise will also help you to see potential problems if you’re dealing with international sourcing. It’s recommended that you expand your international supplier base a bit more to mitigate risks from political instability or natural disasters. According to Supply Chain Review, about 55% of overseas suppliers would not be able to maintain their workflow during a disaster, so it’s important to prepare for the worst.
Understand How Your Suppliers Work
Developing insights and an understanding of your supplier’s workflow has several benefits as highlighted by Harvard Business Review. Doing this not only shows respect for their business, it highlights a commitment to co-prosperity. It demonstrates that you are focused on developing a relationship where both of your companies profit.
One example of this practice in action comes from Toyota. The company has an complete supplier relationship management team. This group conducts regular company-to-company reviews in order to better manage any concerns, needs, or requests so that Toyota and all of its suppliers are on the same page and working as partners.
Inventory management tools and services to track inventory, such as Inventooly, eComEngine, Cin7, Ordoro, Fishbowl, or Veeqo are a great resource for this.
Talk Through Misunderstandings
When the inevitable misunderstanding or problem occurs with a supplier, dialogue is the key to a successful resolution. Perhaps they provided you with a batch of faulty ingredients or you’re struggling with cash flow or payment collection issues. Regardless of the issue, being open and honest avoids causing issues to escalate and prevents permanent damage to the relationship.
Working toward a resolution that will make both parties feel secure is a key part of the relationship management process. Inc. published some worthwhile tips from a former FBI negotiator for staying calm and on point while communicating during a crisis. Though you are not entering into a negotiation to the degree that the FBI might face, remaining calm and focused ensures that communication is successful.
Provide Feedback to Boost Supplier Relationships
When feedback is shared consistently and includes a supplier’s successes and shortcomings, it is received as just part of the process. It also demonstrates a commitment to partnership. Honda does this when it sends a report card to its suppliers every month. This simple document highlights the quality and quantity of the supplies it ordered so that suppliers can make adjustments and improvements.
Doing this allows suppliers to work on fixing issues immediately. You may also want to consider a periodic SWOT analysis to determine what’s working, what isn’t, and how to change that.
It’s true that a company the size of Honda may have more clout and their feedback more quickly accepted than a newer company. But providing fair, open feedback and asking how you can help close the gap on any items will help you optimize your supplier relationships regardless of your size. Remember, no company sets out to provide a poor product or experience, so if you feel you’re receiving one or both of those things from your supplier, it’s likely there’s a miscommunication in expectations that can be resolved with a fair, detailed conversation.
Meet Your Suppliers Face to Face
In our digital world where email and text dominate, consider taking the time to meet your suppliers in person. With digital communication becoming the dominant medium, taking time to meet them face to face can prove to be an incredible relationship builder.
It need not be a lengthy visit. Something as simple as a factory tour and lunch goes a long way. While you’re there try to get to know a bit more about them personally then use that to build on the relationship.
Act With Integrity and Honesty
As with any relationship, suppliers that trust you will treat more fairly with you. Resist the urge to use even a white like to move a supplier to act. Treat reasonably with them and stay in integrity and you’ll find that they are more likely to do the same with you. And don’t be afraid to cast light onto challenging situations. When dealing with issues, focus on solutions not problems to encourage them to remain in integrity.
Be Mindful of Cultural Differences
Regardless of whether you are working in local or international suppliers, getting to know a bit about your supplier’s cultural nuances will help you to build a solid relationship. Understanding how they perceive respect and where they draw boundaries can be accomplished by asking questions and listening attentively. This can help you to build good rapport and solidify your relationship for the long term.
Forge a Lasting Partnership
Remember, your relationship with suppliers is a two-way street. As long as you treat them as a partner rather than a subordinate, you should be progressing toward a customer-supplier relationship both parties value for their ongoing success.
Fair, well-timed feedback with the offer to receive input on your half of the relationship should lead to two professional parties working together toward a mutually beneficial relationship.
This is a guest post from Kickfurther, the first inventory funding platform, where companies fund between $20,000 to $1,000,000 in inventory in as little as an hour at rates that are often 30% lower than found elsewhere and set a customized payment timeline specific to their sales cycles.
Get Our Best Practices Guide
20+ pages of action-packed content designed for you to get the most out of your inspections.
- Vet and source suppliers
- Define your product specifications
- Discover the types of inspections and when to do them
- Improve your inspections