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PairSoft • April 7, 2022
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When the procurement function is aligned with broader business priorities and strategies, procurement’s value proposition soars. As part of that value proposition, procurement leaders are continuing to expand the role of procurement across the wider supply chain. However, one area where the alignment is actually slipping is supplier collaboration, which we began discussing in our last article, Three Powerful Benefits of Strong Supplier Relationships. The 2018 Deloitte Global CPO Survey found that supplier relations are an underutilized avenue for delivering value. Considering that for many industries, the percentage of product value outsourced to suppliers exceeds 40%, your organization’s relationships with its suppliers can tip the scales of profitability. What does it take to improve supplier collaboration? We share 5 tips to improve supplier relationships here.
Just as it is in our personal lives, clear and consistent communication is foundational in business relationships. To build effective, long-term relationships with suppliers, buyers must communicate with the suppliers on the basis of an equal partnership. Aggressive negotiation tactics, for example, will likely undermine trust and turn the relationship into a combative and resentful one. It’s helpful to consider the supplier as an extension of the internal organization and entitled to the professional respect afforded to co-workers.
Consider providing a technology platform that supports and promotes efficiency and transparency. A vendor self-service portal, for example, enables the vendor to review purchase orders, update contact information, submit invoices, and respond to request for quotes. It’s an effective way to build transparency into your supplier relationships as well as creating an audit trail of activities to help preempt any misunderstandings.
Your organization needs to have confidence that the supplier is delivering what they are being paid to. In turn, the supplier needs confidence they will be paid fairly and in a timely fashion for the products or services they provide. In a positive contract relationship, both sides understand and uphold their obligations, and the best way to ensure this is to utilize vendor contracts that clearly spell out the terms of your purchase relationship.
Regularly reviewing the performance of your suppliers promotes vendor accountability and helps you reduce costs and improve (both internal and external) customer satisfaction. Think of the process as not simply a measurement of metrics but an exercise in continual improvement. By clearly outlining supplier expectations, and sharing the results with them, you provide your vendors with regular feedback they can use to exceed expectations and deliver additional value.
Ultimately, strong relationships between your organization and its suppliers is a net gain. A McKinsey report found that businesses with the most advanced collaboration with suppliers outperformed their peers in growth metrics by a twofold margin. You win by becoming a business your suppliers want to do business with. One that operates ethically, communicates clearly, honors contracts, and empowers vendors with efficiency-promoting tools that makes you easy to do business with.
Improving supplier relationships is smart business, and procurement leaders globally are focusing on collaboration and building partnerships with key suppliers to achieve improved innovation within their organizations. eProcurement solutions can be a powerful asset for organizations seeking to improve supplier relationships and drive results. Learn more here.