Amid the growing push for digital transformation, increasing productivity and improving efficiency, it can be easy to lose sight of the human side of the manufacturing industry. The manufacturing sector isn’t all about competition — it’s a community that requires respect, trust and collaboration to succeed, particularly between suppliers and their buyers.
In this age of disruption, even the most robust and automated company can fall on hard times without support from loyal suppliers. Now, supplier relationship management and strong relationships between both parties play as important a role in a manufacturer’s long-term prospects as their innovation, efficiency and market share.
Going It Alone Is Dangerous in the VUCA Marketplace
The volatility, uncertainty, complexity and ambiguity of the last four years have upended much conventional wisdom about smart supply chain strategy and effective business practices. In just a matter of days in March 2020, the supply chain breakdown caused many companies to lose their hard-won security, forcing stakeholders into overdrive to respond to crises, mitigate risks and try to stay above water.
If you’re reading this, you’re probably all too familiar with what you and your teams had to go through in 2020 just to minimise losses. Surely, many of the strategies and adaptations you’ve implemented since those days have helped with recovery. But chances are some of that success was by virtue of the grace of good suppliers. Imagine how you would have fared against all of these challenges without them.
The True Value of Good Supplier Relationships
Though many companies are reaping the rewards of investing in supply chain resilience over the last few years, the VUCA landscape that’s defined much of this decade continues into 2024, with problems like supply chain congestion, geopolitical conflicts, raw material shortages, transportation issues and the ups and downs in the market affecting the industry.
Successful supplier relationship management is a critical part of navigating the current landscape. Building strong supplier relationships enables:
- Stability in Times of Crisis
Even when it may not make the most financial sense, trust goes a long way in mitigating risk, so suppliers are more likely to move up deadlines or provide much-needed materials when their most loyal buyers are in need. In the midst of another global crisis like the last pandemic, that kind of support could mean the difference between business success and business failure. - Significant Cost Savings
When suppliers trust you and are well supported by your company, this may also lead to overall better pricing, discounts and more favorable contract terms, providing a kind of X factor that can tangibly benefit your bottom line. - Mutual Advancement
It’s best practice to partner with companies with the same type of footprint your company has. However, when two companies work well together and have similar goals, it makes sense for them to help each other grow. Priority treatment and discounts from a locally based supplier can be indispensable for breaking into a new market that you currently have no presence in.
4 Strategies for Better Supplier Relationships
What does it take to build winning relationships with suppliers? These four tips can help you change your culture and approach to supplier relationship management so you can build a more resilient supply chain:
1. Set expectations upfront
When vetting suppliers, it’s important to be clear about your needs and expectations with vendors at the very beginning of the relationship. This eliminates ambiguity and puts them in a position to succeed in fulfilling their end of the bargain.
Clearly outlining expectations also opens the door for suppliers to be upfront about their own needs, setting the tone for a more transparent and collaborative relationship where stakeholders at both companies can learn from each other.
2. Build feedback systems
Beyond setting expectations, it’s also critical for both parties to continue to enforce them and hold each other accountable. Set a regular meeting with suppliers — even if it’s just quarterly — to review performance, address issues and provide overall feedback about working with them. Not only does this give them a chance to correct any problems or lean more into what’s working really well, but it also lays the foundation for a more collaborative partnership that can provide greater ROI over time.
Feedback should go both ways so your team can address any issues they’re creating for your suppliers as well. Providing feedback to suppliers on their performance and seeking feedback from them on your own operations can help improve collaboration and performance.
3. Be proactive vs reactive
Good suppliers will warn their customers ahead of time if there’s going to be a shipping delay or quality issue. However, good customers will also warn if there’s going to be a delay in payment, or if there’s potential they’ll have to change an order instead of waiting until the last minute or after an issue has already occurred.
4. Approach supplier relationships as a partnership
The best way to improve any relationship is to help the other party succeed, and for them to help you succeed. Encourage mutual transparency about goals and challenges you’re having. Regular check-ins and feedback sessions could be the perfect opportunity for those kinds of conversations. As relationships deepen, they become more of a partnership, helping both parties achieve their goals, grow their businesses and realise greater cost savings through win-win dynamics.
Finding Stability in Supplier Relationship Management
Given the geopolitical landscape, supply chain security continues to be at risk for the foreseeable future. One of the biggest adaptations that companies can make to improve resilience is to understand that we’re all in this together, and approach supplier relationship management with that same clarity, transparency and empathy. Companies that embrace true partnerships stand a better chance of weathering the current storm. And when the winds die down, they will emerge with the foundation to become a bigger player in the evolving market.
