Why Is the Supplier Relationship Important?
Building a trusted relationship with the supply base, be that existing or new prospective suppliers is a critical skill for procurement and supply chain professionals. How you position, manage and measure suppliers in your supply network can determine the type of working relationship that you need to build.
How Do I Manage a Supplier Relationship?
To successfully manage appropriate supplier relationships it is necessary to look at them from a practice stance. By breaking down the relationship into process steps, and then the role of the manager, is to measure success based on delivering business outcomes. This could be in the form of price reduction, cost information exchange, technology or innovation exchanges and so on.
It is therefore important to base the relationship process and objectives on the goods and services provided rather than the supplier.
Are You Managing Supplier Relationships Effectively?
Prof. Richard Wilding OBE explores the question; do you really manage supplier relationships effectively?
How Do You Communicate with Suppliers?
Subject to the type of relationship that you are looking to form with the supplier from adversarial through to co-dependant will determine the volume and frequency of communication that you have with your supply base.
Where the commodity is routine and low value, it may be a catalogue transaction where there is little or no communication between the buyer and supplier; however for strategic items there will be need to form a much closer working relationship.
Face to face communication, site audits and regular performance reviews will play a key part of keeping the relationship on track. Sharing your company objectives, policies and direction with critical suppliers can support both parties to form a win: win relationship where both parties feel the benefit.
Regardless of where your supplier relationship sits on the relationship spectrum, it is important that regular performance reviews are undertaken and that an awareness of impacts in the market can assist you with assessing the suitability of the relationship for future prosperity.
Is Managing a Supplier Relationship Complex?
Managing the Supplier Relationship can be a complex task and is subject to the value that you are looking to drive from the relationship, cost focused organisations will value quicker transactional relationships, whilst companies that look for differentiation as their market offering will place increased value on sustaining long term closer working relationships.
The management of wider issues such as dependencies, risk or certainties, the frequency of exchange and bounded rationality also require careful consideration.
The other aspect that needs to be considered is the level of ‘risk’ that is involved with the management of the buyer/supplier interaction. The balancing out of dependencies and risks will yield a variety of possible relationship management strategies.
To find out more about this subject read the full knowledge paper: Managing Supplier Relationships
Managing Supplier Relationships
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