One of the top procurement trends in 2016 is focus of building strong, collaborative relationships with key suppliers. It is an area of business more people are focusing on for numerous reasons. We’ve discussed these relationships here on the blog recently, including ways to make the shift from that of adversaries to partners, highlighting the different roles individuals can take in influencing the shift, and how suppliers and organizations can work together towards a shared vision of success.
Recently, I was invited to discuss some of the merits of building these supplier relationships as well as suggestions to get started at the Procurement Leaders webinar, Turning Supplier Relationship Management into Business Performance.
So, why focus on supplier relationships?
First and foremost, if you have a solid, strong and trustworthy relationship with your suppliers, you can deliver the best for your organization. From these strong relationships, a few things will naturally influence three areas: price, quality and performance.
Strong supplier relationships support open communication and great collaboration, providing opportunities to negotiate a better price, improve overall product quality and push for better performance. By sharing of goals and roadmaps you will provide the supplier with visibility into what is important to you and the organization. Now you can work together to drive efficiencies and automation. It’s a win-win for both groups.
But how do you get there? How do you identify some key suppliers?
This is probably the biggest question I get from the start. How, when I have thousands of suppliers, can I have a relationship with all of them? Or how do I identify the key suppliers to focus on?
Obviously, if you have thousands of suppliers, you are not going to have partnering relationships with each of them. My suggestion is to start with a basic criteria, organizing them into tiers (i.e. silver, gold and platinum), based on the number of transactions or the biggest spend with a group. Another factor to consider is those that bring significant value aside from price, for example, a group with a mission similar to yours such as sustainability, diversity, etc.
Once you’ve grouped and identified them, you need to really focus on building these relationships. Here are a few key checklist items to make sure you put your best foot forwards towards effective supplier relationship management:
- Ask for supplier feedback
- Meet with suppliers face to face
- Agree on both sides’ expectations for the relationship
- Establish a cadence of regular communication
- Agree to hold each other accountable
One final item to consider when embarking on this journey: You may need to look for an individual within your organization with a different skill set than your typical contract negotiator. You are looking for someone who can build a long-term, strategic conversation based on the relationship side of things. Get started today, identifying those vendors that can be strategic partners, and start communicating and building those relationships to start realizing improvements in price, quality and performance.