Supplier relationship management plays a crucial role in any organization. It is a continuous process that starts with sourcing the materials that businesses utilize to maintain sustainable relationships with vendors.
The top priority for any business should be to develop a long-term supplier relationship based on trust and loyalty. However, this can be achieved only through a well-developed Supplier Relationship Management process, which will create a win-win relationship for both sides.
Find out how you can improve your supplier relationship:
Categorize Your Suppliers
The suppliers vary based on their level of engagement. By categorizing suppliers into segments according to pre-agreed criteria, you can give the necessary attention to each of them. It’s wise to understand the appropriate level of attention that you need to provide goods and services.
Supplier categorization enables you to decide upon the vendors who would create a competitive edge for your company. The absence of a well-organized segmentation may result in a supplier approach that is not distinguished.
This means all the suppliers would be managed using the same method wasting resources on small and non-strategic suppliers and not dedicating sufficient time to the strategic suppliers that give your business a competitive edge.
Supplier segmentation can be done in many ways using various segmentation groups, such as strategic, significant, or transactional. The key is how you approach and manage multiple suppliers in different groups and not the grouping itself.
Also, you should have your SRM documentation for each supplier segment. This should serve as a help guide for both the supplier category and the team that is responsible for the SRM process.
Create a Right Team
Different suppliers require different approaches and, therefore different competencies. For example, a commodity supplier needs a strong negotiator, while a strategic non-commodity supplier may need a stronger relationship builder.
Having relevant people with the right relationship-building skills and a solid business understanding is vital for a successful SRM. These relationship-building competencies are generally not found among the strong negotiators, so it makes sense to hire different people for different supplier categories. Developing stronger relationships with strategic suppliers will boost your collaboration, thus enhancing your business’s competitiveness.
Develop Strong Relationships with Suppliers
Communication is the crucial point in the supplier management process when working with strategic suppliers. Therefore, it is highly recommended to develop strong and reliable relationships with suppliers and treat them as your trusted partners.
Your interactions with them should not be limited to cost-saving initiatives and deadlines. There should also be discussions and agreements on how to enhance the collaboration for both parties, potentially making the joint business and value creation more excellent.
The most effective way to develop constructive communication with suppliers is by sharing your plans and strategies. Show that you are prepared to be clear. Transparency will reinforce the trust and open new opportunities for suppliers to realize where they fit in your plans. Accordingly, they will be able to proactively suggest how they can help your company be even more competitive in the market.
Evaluate the Data
Most organizations have related data on suppliers that can give different indications on how the relationship is. This can be information regarding spend, delivery, quality, or service development on suppliers. In many organizations, such data is scattered and not used to the fullest potential.
To eliminate unnecessary risks related to the lack of supplier compliance or performance, you should find what appropriate data you can have on hand and then start tracking and analyzing it. Such data can be helpful in the discussions with suppliers about the performance of your cooperation. It can help you and your suppliers find areas and processes with challenges that need attention to build collaboration.
Implement Technology to Simplify the Process
One of the best ways to enhance supplier relationship management is implementing technology to ease the overall SRM process. With a software solution built for the procurement team and supplier managers, you can automate almost all processes requiring a lot of time and effort if managed manually. Moreover, technology can enable a much more fact-based approach to the supplier relationship by having significant facts associated with the suppliers in one solution. With the online software, you will be able to reduce supplier risk, supplier cost and enhance supplier performance, quality, and service.
With advanced software like SutiProcure, you can quickly analyze each vendor and mitigate any risks regarding their performance. With real-time data, you can develop stronger supplier relationships and enhance joint performance in the supply chain. With the online software, you can leverage the supplier information and consequently negotiate better contracts.