Sourcing and Procurement
How to improve supplier relationship management?
It is well-known that monetary benefit to the business and its suppliers is crucial for a trusting relationship. Be it a start-up or a large enterprise, businesses outsource up to 40% of their product or service value to their suppliers. Great business relationships with your suppliers can boost profitability. Yet, supplier relationship management remains one of the most ignored aspects of a business. This blog will highlight best practices in supplier relationship management and how businesses can use them to boost profitability.
What is supplier relationship management?
Supplier relationship management (SRM) is an ongoing program within businesses that assess the suppliers’ contribution over time. Businesses can rate the value the suppliers deliver and the efficiency of the communication channels and identify inefficiencies proactively. Most businesses with a dedicated SRM solutions are aware of their existing strengths and work on the gaps in their supplier pool, thus generating mutual value. Without an SRM strategy, businesses can face considerable damage due to delays in product deliveries, inconsistent supply chains, penalties from regulatory bodies, and damage to the brand image.
Supplier relationship management best practices
SRM requires a strategic approach with a continuous feedback and improvement cycle. Here are the top 10 vendor relationship management best practices.
Use suppliers that align with your values
Business values are the foundation of any relationship. Long-term business happens when your values align with those of the supplier. Additionally, it is important to give personal attention to the suppliers and address their unique needs. This applies especially in culturally diverse ecosystems where attention to such detail makes a huge difference.
Define the process clearly and manage expectations
The contract should clearly mention your deliverables, KPIs, and lines of communication. It should also mention the process for dispute resolution and the exit mechanism. This helps avoid any misunderstandings that could be costly for both parties.
Address challenges head-on
By avoiding disputes and misunderstandings, businesses risk impacting the overall productivity of the business–supplier relationship. A dedicated team or a representative should address and resolve any challenges proactively. It is important for businesses to have an honest discussion to find a solution to the challenge.
Clear and consistent communication
The communication channel for order placement to fulfilment, payments, and dispute resolution should be clear to the business and the supplier. This includes payment terms, cancellation policies, payment modes, fulfilment channels, and product returns. In case of delays in product/service delivery or payments, there should be a proactive intimation so that the other party can take the necessary steps.
Pay the suppliers on time
Cash flow is a critical success metric for all businesses, including your suppliers. According to a survey, 60% of small businesses identify cash flow as a major problem. By paying your suppliers within the agreed timelines, you can get preferential treatment and build trust.
Get the best deal
Paying your suppliers on time can also get you better deals and catapult you ahead of your competition. Your suppliers will trust your integrity and will be willing to lower the price of their products and services because they want to conduct more business.
Understand and adhere to the contract terms
Contracts form the baseline of your business transactions, and understanding the contract lets your suppliers know what they are being paid for and their obligations.
Use technology to build better supplier relationships. Examples of such technology could be secure, private videoconferencing, inventory and SRM systems with supplier portals, automated billing and payments system, contract management, and feedback loop system.
Create new opportunities with the same suppliers
Get on a video call or meet in person and create new business opportunities. You could exchange references and add value to each other’s business, refer to a non-competitor, or pool the resources for mutual growth.
Reduce the risk exposure
Successful and resilient businesses never depend on a single supplier. They perform vetting, organisational stability checks, and suppliers’ experience in handling crises as part of risk management.
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How can Infosys BPM help?
The Infosys BPM ProcureEdge platform increases the spend visibility across products, business units, and categories. Read more about how you can manage the procurement ecosystem with Infosys BPM.