This guest blog comes to us from Megan Ray Nichols of Schooled by Science.Strong supplier relationships are key for businesses wanting to maintain growth and expand into new markets. If a supplier is essential to your business, your relationship with that entity can easily develop into a strategic alliance — the success of your business helps theirs, and vice versa.
With a strong relationship, both businesses can move away from cost-cutting and profit-maximizing moves to a shared strategy of real mutual benefit.
Regularly working with the same vendors can streamline the procurement process and eliminate the costs typical to establishing a new supplier relationship. Also, as knowledgeable as you and your team are about industry trends and developments, suppliers have access to a range of contacts and other information sources you may not be privy to. Suppliers — if they're invested in your business's growth — may be much quicker to talk with you about new avenues for expansion, market shake-ups or new goods and materials your company may benefit from.
If you lean heavily on suppliers like just about any business, then building strong relationships with them will be crucial. Below, we'll cover four different techniques you can use to grow your relationship with your suppliers:
1. Manage Critical Suppliers Individually
A personalized approach rather than an algorithmic or systemic one will be essential for fostering good relationships with suppliers. Management approaches that work with less critical vendors in a crowded market — like the use of e-auction systems — can be used, but they won't help you build strong relationships.
Instead, work directly and closely with your suppliers. You may even consider involving them directly in product development, risk management programs or initiatives to build out your business's overall supply chain.
Soliciting advice and expertise from vendors can provide immediate benefits and build communication between you and your supplier.
2. Establish a Supplier Relationship Management Program
To build a strong relationship with critical suppliers, you'll need an action plan. Start by identifying the most essential suppliers for your business. Depending on your organization's needs and resources, you may want to go further and classify them based on potential profit impacts and risks.
Once you've identified the entities that will help your organization most in the long run, you can start putting supplier management strategies into place. These strategies will help you build and structure your relationship with a vendor. They'll also help you manage any potential issues or miscommunications that may arise, which can prevent a relationship breakdown in case of an error.
3. Keep Lead Times Reasonable
In general, it's a good idea to be careful about lead times and demands with quick turnarounds. Whenever possible, give your suppliers enough time to source the goods and materials needed to fill your orders.
Similarly, you should be sure to pay your suppliers on time. Prompt payment may seem like a low bar to clear, but it's not unusual for vendors to wait days, weeks or even longer for businesses to pay after an order is fulfilled. Good payment practices can solidify your business as a reliable partner.
4. Communicate Consistently and Effectively
Keep communication channels open with critical suppliers and make transparency a top priority. Similarly, focus your relationship-building efforts on suppliers who make similar moves toward strong, reliable communication. Maintaining open channels with your vendors will prevent communication breakdowns. Regular discussions will also help you understand how your supplier operates, as well as their internal language and business culture.
Sharing information with your supplier can also encourage trust. In the same way that they have access to valuable contacts and knowledge that your business may not, your team also has useful and exclusive data.
Time will help here. Being a reliable, long-term customer is often enough for a major supplier to become invested in the success of your business. Sticking with the same companies and building a rapport with your contacts can go a long way in laying the foundation for strong supplier relationships.
Your Business Can Cultivate Reliable Supplier Relationships
A strong supplier relationship can be a massive boon for any business. It can make procurement of goods easier and offer value for a company in the form of expert advice and insights.
When building a long-lasting supplier relationship, mutual communication and reliability will be foundational. Maintaining open communication channels, paying suppliers promptly and managing supplier relationships individually can all go a long way in nurturing these connections.
In some cases, time may be enough to solidify a valuable connection. Paying promptly, communicating clearly and keeping demands reasonable over time can convince a supplier to further commit to a mutually beneficial relationship with your company.