Once upon a time I was asked to set out a strategy for improving supply chain management with the objective to reduce our reliance on some key suppliers whose products were considered to be of such a specialised nature as to warrant them as “threateningly” strategic to the future of the company.
I planned and executed this with enthusiastic vigour, drawing on a comfort zone of tactics that included product redesign, dual sourcing and extending the production base to bring key component manufacture in house – all designed to reduce or eradicate reliance on these suppliers.
I believe that even now those tactics had some merit and in some circumstances would still be the optimum course of action (for example with financially insecure suppliers). But, I now recognise how much of that vigour was misplaced, and how a better balance could have been achieved had the concept of developing supplier partnerships also been on the radar.
How customer supplier partnerships can impact your company
Suppliers can be an important source of information regarding ways in which both small and large businesses can improve performance and productivity. They can inform you on:
- Improvement of products through contributions to product design, technology, or ideas for producing new products. In most such instances, suppliers help buyers by pointing out ways in which designs can be improved or more desirable materials can be used.
- Improvements in product quality. In addition to providing design recommendations that result in improved products, suppliers are often sources of suggestions that enable buyers to achieve consistent tolerances in production.
- Improvements in speed to market.
- Reductions in total product cost, either through streamlining of work processes (inventory management, new product design, scheduling, etc.) or replacement of costly components with less expensive—but still effective—ones.
- Improvements in customer satisfaction.
Key factors in developing effective partnerships with suppliers
Companies need to do the necessary legwork to make sure they do not find themselves linked to a poor or untrustworthy supplier that can erode a business’s financial fortunes and industry/community reputation in a remarkably short span of time. When establishing supplier relationships, bear these important points in mind:
- An honest and trusting relationship is essential to allow a free flow of ideas and information from both sides.
- Follow a concept of cross pollination with both sides being pro-active and reactive to each other’s requirements, where total satisfaction for the ultimate customer is the prime objective.
- Both parties need to recognise that they have common profit objectives. The financial soundness of both parties is a key factor in the relationship.
- The partnership needs to be a long term one for it to be effective and ever-improving.
- The partners need to identify key performance indicators from the start and monitor performance closely and regularly.
- Communications between both companies need to be exceptional at all levels, not just at the top, both on an informal and formal basis.
- Both sets of frontline staff need to be closely in touch with the ultimate customer’s needs.
- Flexibility in responding, reviews and supplier involvement are essential to prevent complacency or staleness creeping into a long term partnership.
Developing good relationships with suppliers is not a complicated process. Like any marriage, real partnership is a two – way process and, as with so much in business today, can’t be taken for granted.
Be communicative, treat them fairly, be demanding (as well as loyal) and pay them on time. It’s that easy.
How to Build a Better Supplier Partnership May 12, 2011 Industry Week
Customer-Supplier Relationship May 21, 2009 Total Quality Management
Strong Supply Relationships Reduce Cost, Spark Innovation January 15, 1998.