5 Strategies for Improving Supplier Relationship Management
Supplier relationship management (SRM) refers to interacting with and managing third-party vendors that provide goods, materials, and services to your organization. It sounds easy enough—you choose suppliers that are cost-efficient and easy to work with to maximize the value of the business relationship.
In practice, it’s much more complicated than that. Supplier management has gone through a major transition over the last few years because of growth in technology and the global scale of the economy. You have so many supplier choices that it’s hard to choose the best fit, but using emerging strategies to streamline your supplier management system can help a lot.1
Two Historical Approaches to SRM
There are two general approaches to Supplier Relationship Management:2
1. Reactive Approach – Where companies start managing the supplier relationships only when unpleasant situations with suppliers occur, and try to figure out how to improve the performance of unreliable suppliers. This approach consumes quite a lot of time and resources, which could have been better spent on more important business processes.
2. Strategic approach – Where supplier relationship management starts even before an agreement with supplier is signed, in order to ensure the competitive advantage of the company in the long run. Inputs from key stakeholders and initiatives for long term gain are implemented. This is a forward-focused approach with a strategic plan, which can lead to a successful relationship even in the early stages.
The strategic approach to supplier relationship management has always been key to successful businesses that rely on third-party suppliers, regardless of industry. During the COVID pandemic the importance of supplier management and supply chain management came into focus as an even more important priority than ever before with the impact on travel and global supply chains. Companies with a focus on strategic sourcing and strategic supplier relationship management were able to weather the storm in a much better way.
5 Strategies for Improving SRM
Having long-lasting, trusted relationships with dedicated suppliers should be a primary goal of any business that strives to succeed in the market, so let’s find out which strategies can help achieve this.
1. Technology Makes Supplier Relationship Management Simple:
Invest in supplier management software to keep track of information about your suppliers in one place. You can even go further and install advanced purchase order management software, which you can use to create, process, and track purchase orders with your suppliers. Some software solutions, like PLANERGY integrate these supplier management solutions functions into the same platform.
2. Relationships Should be Strong and Deep:
Make sure to maintain strong and regular communication with each of your suppliers. Keep them regularly informed and up to date, on your strategy and plans so that they know where they fit in and how they can help, plan for and benefit from those plans. Make them your partner. If you appreciate their work, let them know. If something’s not working for you, let them know. A stronger, deeper relationship with clear and frequent communication allows this communication to become more organic.
Your suppliers are not just vendors. They are your partners, and this partnership should be based not only on financial transactions, but also on mutual trust and loyalty. Make your suppliers feel like they are a part of your business. A two-way and win-win relationship is important, especially for you key suppliers. Share information with them about your processes, such as releases of new products and promotions, and listen to their concerns.
3. Leverage the Importance of Timely Payments: If you don’t want to lose your suppliers, step one is making sure to pay them on time. Cash flow is important for their company just as it is for yours. This way, you will prove that you are a reliable customer and that you’re easy to work with. If for any reason you cannot make the payment on a date agreed, then inform the supplier as soon as possible with the date on which they can expect the payment. Suppliers like timely payments just like you like timely action on their side. Cash flow is important for their company just as it is for yours. It really is that simple. If you’re having other issues, like controlling spend, software solutions like AP Automation software can help you easily match payments with invoices and reduce errors.
4. Detailed Agreements Make Supplier Relationships Easier: If you are buying from a vendor on a regular basis, Supplier Relationship Agreements with a strong contract management process is a must. Write down everything that both parties expect from your partnership such as Item or Service Description, Price, Delivery Terms, Payment Terms, Communications, and so on, and then have both parties sign it.
This can be a simple or complicated document depending on your business requirements. A well-documented Supplier Relationship Agreement will reduce the possibility of confusion or disputes. It’s often a good idea to create a flowchart or deck to explain the process to your team, so everyone knows their duties and can recognize if something goes wrong in the workflow.
5. Evaluate the Risks: Always evaluate the risks of dealing with a supplier, and in particular a new supplier, especially if you have a complex supply chain. Gathering the right supplier data is extremely important for supplier selection and evaluation. Ask for references, examples of their previous work, years in business, areas of expertise, how they deal with a crisis, what they did the last time they had to deal with a crisis, and so on. Are they competitively priced? Do they have the right experience? Do they have the capacity to deal with your orders? Are they financially stable? These are just some of the questions you should be asking. Maybe the supplier you select is not the cheapest but guarantees 100% on-time delivery with a money back offering; you can live with that because a chain is only as strong as its weakest link, and if your vendor lets you down you whole supply chain may be at risk, which can affect your ability to deliver to your customers.
Often in business, things go wrong. But by evaluating vendor risk profiles in tandem with a good Supplier Relationship Agreement, you can mitigate the risks and be ready to deal with any emergencies in partnership with your vendors, which can help minimize interruptions to your business.
Suppliers can actually have a huge impact on a company’s processes. Suppliers play a central role in driving revenue, and that should never be ignored. Whether your business works with wholesalers & distributors or manufacturers & vendors, being able to work with reliable, high-quality suppliers can help a business grow at scale. Unreliable suppliers can create bottlenecks in your workflow, and have a greater negative impact on clients and consumers than you probably realize. Visit Exporta Wholesale to learn more about ways you can manage new supplier relationships.
About Exporta Technologies
Exporta Wholesale is the largest marketplace connecting suppliers in Latin America with buyers in North America. Today, we have a network of over 5,000 Latin American suppliers serving a variety of consumer goods and product categories in the United States.
Exporta’s marketplace offers buyers a full service experience in the origination, sourcing and managing of products. The platform was founded on the idea that curation and service are the most important elements in the buyer’s journey. Exporta’s marketplace is building technology that addresses the pains of sourcing products internationally at attractive prices.