In the world of Procurement, many things can be taken for granted. One such thing is your suppliers and their ability to provide as and when needed. Becoming complacent with these relationships is all too easy and costly. You not only miss out on opportunities but also risk major setbacks due to possible supplier disruptions.
The first step to building a resilient supply chain is strengthening your relationships with suppliers.
Why now, you may ask
The importance of good relationships with suppliers has never been more important than it is now. The slow supply chain recovery post-pandemic, along with increased volatility and disruptions due to factors like climate change – means key partnerships can make or break your business moving into the new year. According to Deloitte’s 2021 CPO survey, only 26% of leaders were able to confidently predict risks within their supplier base. In light of this, enterprise leaders must keep their eyes peeled for healthy vendor relationships that will last beyond 2022.
The era of the linear, traditional supply chain is long gone. We now need a unified, transparent, system that links all elements to create a singular, intelligent entity. In this blog, we will highlight some high-risk areas that need fixing and ways you can go about building better supplier relationships.
Some costly-to-ignore risk areas
Shaky vendor relationships can expose an organization to many challenges. Here we’ve listed some of the top ones:
- Reputational risk: Who your supplier is, the quality of their process, the final service/product delivered by them – any failings in any of these can damage your organization’s reputation. For instance, if a supplier is using unethical sourcing techniques, like employing children, it could speak to what you condone as an organization. This can lead to reduced sales, loss of customer goodwill, and even lost customers.
- Information security and privacy:Instances wherein sensitive data, either internal or customer data, is compromised by a cyber-security failure at the supplier’s end. For the customers, this would be a violation of the chain of trust, and for you, it could mean huge financial and reputational damage.
- Regulatory risk: The risk arising due to non-adherence to regulatory requirements as laid down by the jurisdictions within which you operate. This could mean legal as well as financial implications.
- Resilience risk:A circumstance wherein a failure or interruption at the supplier’s end may lead to an interruption in serving the end-customer. For instance, a supplier’s inability to come through with raw materials on the set date, due to local turbulence, may delay or hinder the delivery of your end-product.
The key to gaining a more comprehensive view of supplier risks is interconnected digital tools, physical infrastructure, and corresponding data streams. Robust and dependable data can help provide better supply chain visibility and help leaders identify potential weak links. With the resultant foresight, organizations can proactively respond to emerging threats in an effective, cost-friendly manner.
The first step towards proofing against any of the above risks is to build strong relationships with your suppliers. But what exactly is a strong supplier relationship? One that has all the ingredients of any other good relationship – transparency, communication, mutual trust, and reliability.
How can you build better supplier relationships in 2022?
Get to know your suppliers
Getting to know your suppliers should not just be limited to the products and services they provide or even their pricing. When striving for strong supplier relationships, you must consider the entire essence of the vendor’s firm. From their moral and ethical standing to their mission and vision statements, credibility, history, expansion goals, priorities and presence in media.
Obtaining a holistic view of each supplier and maintaining a central repository that helps keep track of these defining factors is crucial. It’s also important to ensure that the supplier information is always updated by using relevant document trackers, supplier alerts, audit trails, etc. For instance, in tools such as Zycus’ supplier management software, an audit trail is accessible for all the changes a supplier will make to their profile and their submitted documents.
A robust supplier management tool can also help you identify high-risk suppliers who may be in the midst of geographical, climate, or other supply chain disruptions. This can assist alternative supplier selection and business continuity plans.
Make a Solid Relationship Agreement
Work with your supplier to create a well-documented contract that meets all parties’ needs and clearly lays down the terms of the relationship. To create a solid supplier relationship, an organization should agree on specific terms and conditions with their suppliers. This contract needs to ensure there is transparency in the company’s goals and expectations. It is a best practice to include achievable and realistic KPI’s that can be monitored for success. And hold regular compliance reviews of the agreed-upon contract, so that everyone is on the same page and risk is averted.
A contract management tool can help make this process more robust and fault-proof. It helps digitize and safely store all the agreements into a central repository. Stakeholders can access contracts in milliseconds and share them with others very quickly. It also sends alerts and reminders to track contract expiry, contract utilization and off-contract spending. This way both parties can be apprised of critical contract milestones.
Leverage dedicated SRM Technology
How do you ensure your business gets the most out of every supplier opportunity? Invest in dedicated supplier relationship management technology! Technology, without a doubt, improves the whole gamut of sourcing activities. But there are some important supplier-specific benefits which you shouldn’t miss out on.
You can enable and empower your suppliers with a self-service portal, where they can easily review purchase orders and send invoices. It’s good for increasing accountability while also maintaining an audit trail so there are no misunderstandings or frauds within operations – which means more transparency and trust for both parties.
With the help of supplier relationship management technologies, you can get complete and unrivalled insight into your suppliers. The unified view allows for a more stable and fair supply chain by minimizing risks for buyers and maximizing incentives for suppliers for their good work!
The criticality of good supplier relationships cannot be overstated – especially when it comes to averting risk in this increasingly volatile world. 2022 is the year when more and more enterprise leaders plan to build resilience into the core fabric of their supply chains. They know there’s no room for error, and they do not want to get left behind. We hope this blog gave you some helpful tips for improving your supplier relationships.
Learn More: Vendor Management Guide