It's as true in business as in any area of our lives that relationships matter. Sadly, we tend to forget that the business world is not made up of clinical transactions alone but of people interacting with each other.
Why do we need to nurture supplier realtionships?
Good working relationships are oil in the gears of business
Simply put, it's good for business to have good business relationships. Supplier relationships really kick-in after the procurement negotiations have been settled, and one could say that they're procurement fleshed-out and put into action.
What are the benefits of supplier relationship management?
PriceWaterhouseCoopers (PwC) 2013 report on Supplier Relationship Management: How key suppliers drive your company's advantage. "Organisations are starting to realise that they have become more reliant on suppliers in terms of innovative power, security of supply, corporate social responsibility, and on-going cost savings."
This study found the following are the core reasons for fostering good supplier relationships. These need to be focused on being value-driven and not just cost-down.
- Leagility (lean and agile supply chain)
- Increased market share
- Responsiveness to market changes
- Increased ROI
- Shorter order fulfillment times
- Security of supply
- Better quality of products and services
- More efficiency
- Better inventory management
- Better understanding of risk management for both parties
Collaboration with suppliers
The aim is to be working together, to be on each other's sides, and not having to "watch your back" in suspicion of being done in.
McKinsey & Company published The power of successful and supplier collaboration in 2013 which stated: "We define supplier collaboration as the joint development of capabilities for both the customer and supplier for the purposes of reduced cost, process improvements, and innovation in products or services."
Like the advice given by marriage counsellors, it's 100%-100% not 50%-50%. Supplier Relationship Management is about partners, working together in a win-win venture as they share risks and rewards. Each party brings in a set of skills that are a contribution to the process as they co-operate and co-create.
In these business dealings, there needs to be realistic expectations. You need to close the gap between what is expected and what is delivered.
It is important that there are clearly defined roles and outcomes that are methodically worked through and planned together. However, there also needs to be a trusting atmosphere where everyone is adaptable and gives one another room to learn and develop new things.
CIO Review published an article: The Lack of Strong Contract or Supplier Management Is the Silent Killer of Expected Results which states: "Strong supplier relationships result in better pricing, higher quality, emerging innovation and technology, the best resources and access to scarce capacity. Successful contract management does not end when the ink on the signature page dries. That is only the beginning."
With such a close working relationship as the goal, it is wise to choose your supplier partners with care.
Business Automation Technology Helps
There is an ever increasing number of companies digitising and automating business processes, including supplier relationship management, which falls under the umbrella of procurement and contract management. Also, many of these systems facilitate supply chain visibility as more and more organisations are demanding full transparency along the supply chain.
The Soft Skills
These seemingly "soft" skills are extremely powerful in cultivating working relationships. It's interesting to see that these skills are often mentioned when speaking about personal relationships, but they stand true for our work life interactions too.
In fact, according to PwC, the lack of leadership and soft skills are primary reasons for failure to secure good supplier relationships.
Ideally, businesses would want employees who have a high EQ (emotional intelligence) which makes them empathetic and effective in the workplace. Those lacking these crucial traits are often immature and toxic, causing harm to a business and its dealings with others.
These are some of the sought-after soft skills -
- Good communication skills
- Listen first to gain understanding before speaking presumptuously. Ask questions, show interest, be curious and be willing to learn.
- Not taking offense easily and receiving correction graciously
- Showing respect
- Honesty and integrity - produce trust
- When things get sticky, seeking solutions not someone to blame
- Showing gratitude and appreciation, and acknowledging good work.
Written by Jeannie De Vynck
Since 2010, we've been making procurement and contract management software more efficient, cost-effective and less complex. Australian made and owned, our entire team is based in Australia, with offices in Melbourne, Adelaide and Perth.
We configure software, without the need for writing code, long lead times and big budgets. Nimblex fits around you and your company's way of working, you don't have to fit around our software.