The strength of supplier relationships forms the bedrock of every business’s success. For instance by changing credit terms, delivery times or raising or lowering prices, suppliers can significantly influence how a business operates. 

With poor supplier management, businesses risk facing operational bottlenecks, higher costs, and a decline in product quality, ultimately leading to customer dissatisfaction and lost revenue. How you effectively manage these relationships is reflective of how much value you gain from them. 

To help you stay competitive in this crowded business market, this blog therefore addresses how to get the most from a supplier relationship. By adopting the best practices discussed, you can avoid potential pitfalls in your supply chain and ensure your business thrives.

There are tons of suppliers on the market today, but not everyone is a good fit for your business. Selecting the right supplier goes beyond just scanning a series of price lists. Infact, sometimes the cheapest doesn’t always represent the best value for money. The reason being there might be some hidden costs that can outweigh the initial savings, leading to greater overall expenses down the line. 

Your choice should factor in reliability, value, money and even niche alignment. Working with some suppliers will be riskier than others and how you weigh up the importance of these different factors is dependent on your business priorities.

For example, if you’re a tech company big on innovation, suppliers that offer high-quality, specialized components will rank higher. If your business model sells cost efficiency, then you might prioritize suppliers who can provide reasonable quality at lower costs, provided they have a good track record.

Risky vendor relationships not only affect your organization, but also impact your customers. That’s why it’s important to do a background check. It enables you spot risks, empowering you to make informed business decisions that keeps you from dangerous business relationships. 

A comprehensive supplier evaluation should cover: 

• Financial health
  Reputation
• Supply capabilities
• Compliance with industry standards

 You’ll have a picture of their reliability by checking through financial statements and seeking references from existing clients. Assessing the supply capacity also helps you know if they can meet your current and future business demand. 

 If you notice that a supplier falls short in one of these areas, it’s best to discuss with internal stakeholders to see if the business can absorb the risk or it may eventually weigh in the business or disrupt the entire supply chain.

One of the biggest steps you can take towards communication is to know what your expectations are. If you’re unsure about what to expect from suppliers, they may struggle to grasp what’s required of them. That said, detailing the expectation in the contracts helps to kick off on a solid note that both parties are in agreement. 

A detailed contract should cover

• Terms, conditions
• Pricing agreements
• Quality Standards
• Scope of Work 
• Performance Metrics

By clearly defining expectations, you’re on track to maximizing supplier relationships. It also ensures there’s no ambiguity whatsoever on what is expected.

Regular check-ins are equally important for supplier management. This is an opportunity for you to get real-time updates and address misunderstandings and delays that may affect your supply chain. The depth of communication will vary based on the complexity of the supplies. 

For example, complex products like custom-engineered machinery or specialized medical devices require more communication to ensure supplies meet expectations unlike office paper which can be less intensive. Some useful tips for regular communication include: 

• Scheduled meetings in person or virtually dedicated channels (Zoom, Google meet). 
• Having dedicated point of contacts
• Adopting digital tools to share real-time updates on orders, payments, and other necessary information. 

Leveraging these strategies not only helps you build a cooperative relationship, but is also fundamental to achieving long-term success in vendor management.

To achieve consistency across your supply chain, it’s important to bring all your supplier agreements into a single platform. This way, it’s easy to access all agreements in a location. You can also monitor them to enhance control, improve compliance, and simplify the management process.

 Leveraging technology can significantly save time through the process of consolidating information. Digital contract management tools like SAP Ariba, Coupa, and Ivalua allow you keep agreements in a secure, centralized database,  for easy access and retrieval. You also get Automated alerts and reminders for contract renewals and compliance checks so no deadline is missed. 

 These platforms also have collaborative abilities, allowing real-time updates and shared access to documents.

It’s also important to keep a track of supplier Key performance indicators. This goes deeper than what’s in the contract. It helps keep the supply chain running smoothly, allowing you to spot problems before it’s too late to correct. 

Some performance indicators to track include timely deliveries, product quality, and responsivenesss. This way you measure how well your suppliers are meeting expectations. You can also use the performance reviews to emphasize expectations with your suppliers. More often than not, they’ll be willing to work with the feedback and address them promptly. 

Don’t also stop at constructive feedback. When suppliers outperform your expectations, recognise them, reward them. This way you motivate them to keep the high standards while also building loyalty for stronger partnerships.

No supplier is entirely risk-free; the level of risk might just differ. That’s why implementing compliance and risk management strategies is important. It prevents disruptions to your supply chain and also keeps you out of legal issues. 

 Regulations and policies are ever changing, so you want to make sure your suppliers are compliant. This means doing regular verifications for compliance quality management systems, environmental standards, and ethical practices. These routine audits and compliance checks can help identify any gaps early. 

 You also want to develop proactive strategies to mitigate risks. For example you could have alternative suppliers if you’re sourcing from a place susceptible to geopolitical issues. With a contingency plan, you’re almost never caught by surprise and can quickly recover from unplanned events.

Like everything else, the supplier relationship will come to an end, and it’s important to have a clear exit strategy. Define terms in the contract under which an exit will be initiated such as consistent underperformance, non-compliance with standards, or eventualities. 

You also want to have an onboarding process and a detailed plan for transition. This could mean identifying alternative suppliers in advance, so you have backups. Importantly, make sure to also keep the relationship professional. Communicate the exit plan with your suppliers well in advance. Provide ample notice and work together for a smooth transition. This way, you preserve the relationship for future opportunities.

ISP specializes in optimizing the supply chain operations to help you achieve your business goals. We are compliant, adhere to best supplier practices, making the supplier management relationship less burdensome for you. Businesses also use our services to reduce costs by up to 20% boosting cashback without compromising on quality on delivery schedules. 

Click here to see how ISP can support your business growth by providing quality business supplies.