
It’s no surprise that one of the key variables in strategic sourcing is the suppliers a company engages with. Understanding and continuously striving to improve the relationships with your company’s suppliers will not only add value to the business, but also provide additional opportunities to implement better strategies going forward. With supplier identification being the starting place for evaluating your company’s options, your team will become aware of which suppliers have the capabilities and quality you’re looking for, and who may be a good fit for your company’s needs in the long-term.
Whether your company is working with newer suppliers or
suppliers you have worked with for years, there is always room to enhance the
current relationship. Several benefits can come from improving these
relationships such as reduced costs, increased efficiency, and improvements in
operations. Developing the lines and frequency of communication between your
company and the supplier is key in improving the supplier relationship. It
ensures that everyone is on the same page and minimizes the risk of having
miscommunication, which can lead to saving time and money.
By working closely with the supplier and maintaining a
positive working relationship, through good communication, the supplier will be
more likely to provide competitive costs. If there is ever an event in which
your company feels the need to test the market and see what other suppliers
could offer for your business, this can be a true test to see how your supplier
feels the relationship is going. Generally, when companies take their business
to market, incumbent suppliers who have developed great working relationships
with these companies tend to compete and fight for their business. Even if the
business does not feel the need to go to market, if both parties are happy with
the current relationship, suppliers will be more willing to provide cost
reductions and discounts to their customers. Aside from taking your company’s
business to market to achieve cost reductions, many suppliers are willing to
implement incentives and tiered discount structures to good customers. Keep in mind,
these are not the only types of cost reductions available, but working to
improve your company’s relationship with its suppliers will unlock doors to
savings opportunities.
Receiving cost reductions may be one of the most important
aspects of a well-developed supplier relationship, it is not the only benefit
of improving the relationship. As companies work closely with their suppliers
and get to know each other, there is a better opportunity to identify ways in
which both companies can grow together and develop a mutually beneficial
relationship. Both parties can create strategies for improving product quality,
and continuously improve operations to ensure lean and efficient production.
This is key in the relationship because collaborating efforts will lead to
better strategies to improve the product and production processes. Developing
strategies together will instill a more efficient portion of the supply chain
that can lead to greater business opportunities for both the company and the
supplier.
Reducing costs, clear communication, and improving
operations and efficiency are all great benefits of improving the relationships
with your suppliers, however, another benefit to add to the list includes
supply stability. Relationships with your suppliers will be most effective if
they are built for the long-term and turn into partnerships, rather than ad-hoc
relationships. With these relationships continuing to grow, there becomes a
steady supply of the goods and services provided by the supplier. With a mutual
understanding of the relationship and operations involved, there will be a more
consistent effort to develop a more concrete supply of goods and services. This
can also minimize any issues with on-time delivery, product shortages, and
other supply issues.
As we wrap things up, another very important outcome of
developing the relationship with a supplier is the opportunity of supplier
consolidation. By working together and improving production and operations, the
supplier may be able to supply items that your company currently purchases from
another, similar supplier. By consolidating the supply base, your company will
be able to achieve greater savings with discounts and cost reductions by giving
the supplier additional business that your company had with alternative
suppliers. Additionally, your company will receive great products that come
from one supplier, as the supplier will most likely be appreciative of the
increase in business and devotion to growing the relationship. Consolidating
the supply base will also involve consolidating the lines of communication and
again, minimizing risks of miscommunication. The consolidation will allow your
company to streamline the supply base and implement a much more straightforward
supply chain with a few strategic suppliers rather than an abundant amount of
suppliers that supply similar products.
With a consistent effort to improve existing relationships
with your company’s suppliers, doing business with these suppliers will become
much smoother, and in most cases, cheaper. Identifying areas in which your
company and the suppliers can work together to develop mutually beneficial
strategies will help the businesses grow together for the long-term.
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