A question that we often get asked is, “How do we create stronger relationships with our suppliers?”
A couple of Christmases ago, we created an infographic that became one of our most viewed pieces of content of the year! It was called “5 Ways to Give Your Suppliers a Merry Christmas This Year.”
The interesting thing about the advice in the infographic is that none of it is revolutionary rocket science. Procurement has a complex and nuanced role to play in supplier relationship building, one day courting new prospective supply partners, the next day negotiating with them. One day evangelizing the advantages of the winning supplier, the next day giving them tough but constructive feedback about how to improve their performance.
Luckily for us, what suppliers want is fairly straightforward. That does not necessarily mean it is easy for us to deliver, but at least we don’t have to guess what it is.
Here is our advice for creating stronger supplier relationships:
Pay them on time
Nothing impacts the health of a supplier relationship more than late payments. This is especially true in industries where payment terms are already extended. If your suppliers are on the verge of stopping service because they are not getting paid, you’ll be the one to end up with empty inventory shelves and a bad reputation in the marketplace.
Maintain an Open-Door Policy
Most procurement teams only communicate with suppliers when there’s a problem. Be proactive; check in to share updates on continuing challenges or reach out about how your strategy is evolving. Communication helps build trust so that your supplier will recognize you as a partner and not a transaction.
Enable Their Performance
The chances of your supplier achieving what they have been contracted to achieve (and more) increase exponentially when you work with them to break down the barriers impeding their progress. Make sure they know you want to hear about those barriers as they crop up and work side-by-side to resolve them.
Enable Their Creativity
The best suppliers are creative suppliers. They often have greater capacity for innovation than procurement does. Talk to them about your challenges and give them free license to make suggestions – you may just get access to fresh thinking and better outcomes.
Partner on Cost and Share the Rewards
Find out if there are ways to control costs by managing demand, changing product specs, or altering service scope. Most suppliers receive this as a breath of fresh air compared to price-only discussions and they can apply some of what they learn to their other business which helps them from a margin perspective.
Treat Small Suppliers Like a Big Deal
If you are in the process of awarding business to a small supplier, do everything you can to get that contract signed as soon as possible. For a small business, knowing that they have a contract secured may be a game changer for them. They’ll be able to plan for growth, helping your company and their team be successful. Oh, and don’t forget to refer to tip #1 – pay them on time. This is especially critical for small suppliers that are counting on your payments to make payroll and cover their own bills.
Creating stronger supplier relationships is an effort, and it has to be part of procurement culture and the values of the enterprise as a whole. As we learned in 2020, the time to invest in relationships is long before you have to lean on them.
For more on building stronger supplier relationships, check out these Art of Procurement podcasts and resources.