5 Tips for Supplier Relationship Management

The approach that your company uses to interact with and manage suppliers will directly affect the quality of products, competitiveness of your company, and ultimately your growth and profitability. Maintaining good relationships with quality suppliers is essential to the health and growth of every company since you can only be as strong as your weakest link. Reliable and trustworthy suppliers will ensure that your supply chain is strong and meets the expectations of customers and management alike. The following tips describe the ways in which suppliers affect your company and how to make those effects positive.

First, let’s examine the ways in which suppliers impact your company.

1. Quality: Supplier quality directly affects the quality of your final product and the way that customers perceive you. Higher quality increases customer satisfaction and decreases returns, which has a very positive effect on your bottom line.
   
   
2. Competitiveness: Suppliers can give you an advantage over your competition based on their pricing, quality, reliability, and knowledge of industry trends.
   
   
3. Innovation: Suppliers can prove to be a big asset in your product development. The good ones will understand your company, its industry and needs, and can help with cost-reduction ideas for new products.
   
   
4. Timeliness: Their timely deliveries are crucial to how customers view your reliability. A quick turnaround can become the key to minimizing your inventory, freeing up much needed cash.

Now let’s turn to how you can ensure that these effects are positive.

1. Set Clearly Defined Objectives. You must be clear on exactly what you expect from your suppliers so that there are no misinterpretations or confusion. Vital issues to agree on include service level agreements and key performance indicators.
   
   
2. Nurture the Relationship. Work as hard on building a good supplier relationship as you do building a relationship with your customers. When you find reliable suppliers, let them know how much they are appreciated. This will foster a team approach that will more than likely result in lower costs for you.
   
   
3. Always Pay on Time. You can negotiate for favorable payment terms before an order is placed, but once the order is placed, don’t attempt to change the rules. If you cannot pay, keep open communication with suppliers and explain why and when you will pay. You’ll be amazed at the goodwill and benefits you will earn by observing this simple rule.
   
   
4.  Communication, Communication, Communication. Keep the good suppliers aware of what is going on in your company. Maintain open and honest communication at all times by sharing your expectations and satisfaction with current service levels. This is a two-way street so expect the same from your suppliers.
   
   
5. Maintain Flexibility. Very rarely is a final deal exactly the same as the initial brief. Plans go through a number of changes and the natural process of evolution as more ideas are introduced. This goes hand in hand with open lines of communication as each party should provide effort and input into each stage of the process. Being flexible with one another will lead to not only a more trusting relationship but also a much more productive supply chain.