Supplier relationship management (SRM) is more than just ordering goods or services from third party organisations. To get the best out of your suppliers, it’s essential to create close and collaborative relationships with them. It’s not rocket science – like a good relationship in any situation, your aim should be to work together as a team. We’ve put together a few simple strategies for effective supplier relationship management which could have enormous benefits for your business’s bottom line.
Be your supplier’s customer of choice
Research by accounting giant PwC discovered that cost is the most significant challenge for SRM. Cost reduction is an essential part of the process, but if there’s too much focus purely on costs, you’re in danger of discouraging a longer term, more successful relationship. One US management consultancy survey found that companies which had poor SRM programmes gained no financial benefits from their suppliers. On the other hand, the top 10% of companies which had worked on their relationships “reported an average of $298 million in financial benefits from SRM in the prior year”. So it’s clearly important to work on an excellent working relationship in order to build trust, respect and create a strong bond.
One way to do this is by being open and honest and managing expectations. Involve your suppliers in your processes and make them part of your team; this way, they’ll become a vested partner in your business. Invite them to your office and introduce them to your staff; you could also invite them to join company events which will help build personal relationships between individuals in the two companies. By aligning yourselves in this way, you’ll benefit from improved supplier capabilities in terms of innovation, quality, reliability, risk factor and cost reduction.
Prove you’re a good customer
The easiest and most effective way of doing this is to pay your bills on time! And if, for whatever reason, there will a delay in payment, let them know as soon as possible and give them an indication of when they can expect it. Never order goods or services you haven’t got the budget for – if you need something from your supplier urgently, talk to them honestly so you can come to agreement that will suit both parties. After all, your success is also in your supplier’s interests.
Invest in SRM software
You’re always going to have more than one supplier, and the more you acquire, the harder it’ll be to keep track of them. Having too many will lead to inefficiencies and higher administrative costs. Good software can help your relationship with your suppliers by helping you to manage data and monitor performance. It will also flag up troublesome suppliers – those who are unreliable, deliver late and charge more, enabling you to either work on your relationship with the more inefficient and costly ones, or simply let them go.
For advice on improving your supplier relationship management and improving your efficiency, contact us to make an appointment with an experienced member of our team.
