4 Supplier Relationship Management Best Practice

Supplier relationships are going to make or break your business. You’ve got to be able to effectively manage them in order to maintain your costs and manage your assets. With the right strategy in place, you’ll be able to potentially lower your transaction costs while still being able to expand your competitive advantage within your industry. That’s where these best practices can play a tremendous role in managing your relationships.

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1. Methodology Matters

Your supplier relationship must be able to align with corporate goals. It must also do so in a way that bridges across all teams and intitiatives of the corporation. If the entire organization hasn’t recognized and supported the relationship that needs to be managed, then the message that will be sent out is an inconsistent one.

You are one organization. You must speak with one voice.

Methodology matters here because the way you manage this relationship will affect your overall supply chain. You cannot be effective if your supplier relationship management practices are inconsistent. You must do more than integrate the relationship into your organizational culture. You must be able to partner with your suppliers so that your sourcing is improved and you can provide the world class customer service that your customers deserve.

2. Collaborate and Synchronize

The strategic relationships that you need are not going to happen overnight. It requires a mutual level of trust, time and understanding to be ever-present in order for them to flourish and grow. If one party is putting in too many deposits and the other is taking out too many withdrawals, then the relationship is being improperly managed.

Mutual commitment comes from mutual respect.

You can build this respect by creating a framework that integrates the strengths of all parties so that the supply chain is constantly improved. Look at the specific characteristics that each party to the relationship is able to bring to the table and then implement the cost-savings measures across your entire supplier chain that are rationalized instead of implemented with barely a second thought.

Once collaboration has occurred with the suppliers, synchronization must happen within the organization. This starts with the executive leadership and then filters down to the entry-level employee. Individuals will make or break the SRM best practices that you’re trying to enable. Even if just one person hasn’t synchronized with your collaboration efforts, it can be enough to derail the process.

3. Technology Enables

Supplier relationship management is more effective when the processes that are being used are standardized for everyone. When an organization has a structure in place that will support the processes of this relationship, then the relationship will become enabled. There must be, however, a certain level of accountability in place for the key objectives of an organization and a supplier to be achieved.

The key to creating an environment of accountability is to encourage an environment of collaboration.

By managing the supplier relationship in such a way where each party jointly identifies and implements the tools and technologies that can further enable cost-savings measures, everyone will feel like they have contributed something of worth to the process. When this occurs, the trust level within the relationship will increase and this will ultimately lead to better overall management of the relationship.

4. Keep Track of the Metrics

If you don’t have metrics in place that will help you keep track of the results that are being achieved, then create them right now. You need to have effective metrics in place in order to be able to achieve a continuous level of improvement. Make sure that you are taking the time to collaborate on these metrics with both your stakeholders and your suppliers to make sure that everyone is on the same page.

Once these metrics are in place, it is critically important that they be enforced. The most effective method of enforcement tends to be a rewards program that measures the effectiveness and cost-savings measures in every supplier relationship. This drives results for an organization because the suppliers are encouraged to compete with each other to drive down prices for you so that the same levels of business can be maintained.

These supplier relationship management best practices may take some time to implement for some organizations, but it is a time investment that is worthwhile to make. By making sure that everyone is on the same page, everyone will be able to save time and money. That will naturally bring about a stronger customer base.

Strategies of Relationship Marketing