Why building strong supplier relationships is important for your business
Oct 21 – All companies that manufacture, supply, or sell products rely on suppliers to deliver the necessary raw materials needed to make the final product. Having an efficient supply chain is just as essential as production or operational performance if companies are to succeed. The supply chain is made up of a series of connected parts that add value at each stage, resulting in an end product that generates profit for the business that produces it.
On a fundamental level, suppliers are needed to deliver materials or fulfil orders for resources that are needed for organizations to operate. Without a strong supplier relationship, the opportunities for maximizing network value are reduced, and profits will be negatively impacted.
How to select a supplier
Find the right supplier can be a difficult process. Not all will be compatible or have the necessary supply chain network to meet your business needs. As well as being able to demonstrate effective order fulfilment, companies need to develop supplier relationships that go far beyond contracts and order numbers.
Having a strong supplier relationship can benefit the business operation in many ways, and successful management will require open communication and a level of trust between organizational leaders. A commitment to honesty and fairness will support a positive relationship, but the supplier chosen will still need to be able to meet order requirements, and material volumes in order for both businesses to succeed.
While there are financial considerations that go along with supplier selection, the cost is not always an indicator of good service. Too often businesses that are concerned with improving the bottom line choose suppliers in a cost-only based decision. Even though the financials can look good on paper, a supplier that is unable to deliver, supplies low-quality materials, or has an inefficient supply chain operation will negate any savings very quickly.
Along with problems and costs associated with receiving orders, this can have a compounded effect in terms of lost future business and making expensive reparations to unhappy customers at the end of the line.
Benefits of effective supplier management
Creating strong relationships for any business purpose will benefits both parties, and the same is true of working with suppliers. As a symbiotic relationship, both companies need and depend upon each other to support different aspects of the business process.
A supplier relies on the orders received from their customers, while businesses depend upon the fulfilment and efficiencies provided by the supplier. Over time, a strong relationship between suppliers and the organizations that use them can generate even further cost savings. Having knowledge of the demands and routines of each business can uncover areas of continuous improvement that can benefit each company.
Over time, companies that use the same supplier for regular business, especially on a large scale can gain price discounts or reductions for orders that can add up to some real savings over time. High order value, large volumes, and repeat business can command some preferential treatment from regular suppliers.
Along with gaining improvements in cost control and operational efficiencies, working closely with suppliers can yield benefits in terms of problem resolution. Both organizations will collaborate better towards repairing or correcting issues that serve the common goal.
Final words
Making the move from customer-supplier to a relationship based upon mutual respect and understanding can foster positive outcomes. As with any organization, suppliers will have their own needs and challenges, but working closely together brings about new opportunities in terms of efficiency and value.
As a strategic partner, suppliers have the power to be an influential driver of business performance, and developing strong ties will position them as a stakeholder that is invested in the long term success of your business operation.
If you are interested in learning more about the i2B procure to pay platform, i2B Connect then please get in touch. We’d love to hear from you.