4 Steps For Creating a Stronger Supplier Relationship Management Process

As your organization grows, your supplier base will grow and become more sophisticated. Managing your supplier relationships and business operations can quickly become complex, and without a solid supplier relationship management process in place, your partnerships and your supply chain can suffer. Today’s business leaders needs to understand the importance of maintaining positive supplier relationships and take measures to create a process that repeatedly supports and curates strong relations. To understand what it takes to create a robust supplier relationship management process, you need to first look at the fundamental pillars of your supplier relations.

The four pillars of supplier relationship management

Supplier relationship management requires collaboration, which doesn’t happen naturally. Instead, you need to design a supply chain to achieve your goals, then manage that chain to ensure everyone works together effectively.

Before diving into creating a strong supplier relationship management process, it’s important to understand the fundamentals of supplier relationship management. There are 4 main pillars for supplier relationships that you must harness to achieve your business goals.

• Trust — You need to make sure you can rely on your suppliers and trust them to follow through on their promises.
• Open communication — Without open communication, your supplier relationships are vulnerable to misunderstandings.
• A win-win mindset — The goal of your supplier relationships should be for both parties to succeed.
• Value creation — As with every relationship, you should strive to create value for both parties.

It’s essential to know these pillars to keep your eye on the benefits a good supplier relationship management strategy can offer. For a long time, companies set objectives, and that was it. Suppliers were not considered a part of the equation. With the push in supplier relationship management’s importance, suppliers have adopted a more central role in the supply chain process. Innovative supply chain leaders understand that suppliers are at the center of the procurement process. The health of your supplier relationships impacts every portion of your company’s ability to hit its objectives, remain competitive, and ensure its supply chain remains intact during difficult market contractions.

4 steps for building a strong supplier relationship management process

In order to have strong supplier relationships, you need a solid foundation to build off of. To get the most out of your relationships, you should follow these 4 steps.

1. Outline necessary objectives and requirements for supplier engagement

Not surprisingly, the first step in building a strong supplier relationship process is to identify your objectives and goals. What do you need from potential suppliers? What goals do you hope to achieve? How will you measure whether your relationship is successful? It is imperative that you find answers to questions like these at the start of the partnership. Some companies call these objectives their supplier requirements. For potential suppliers to become successful, this information needs to be available to both your internal and external vendors.

Your objectives will help potential suppliers self-evaluate and determine if they’re not a good fit for your organization. Strong, communicated supplier requirements are not only the first step of a great relationship, but they set the bar for transparent communication and adherence over time.

2. Choose the right suppliers

After you identify and communicate your objectives and goals, you can begin to choose which suppliers you want to work with. Having your goals listed for reference will help you to easily and quickly identify your selection requirements. While these will be different for every organization and highly dependent on your region, industry, and other factors, some measurements typically used for selection include:

• Pricing
• Quality of past work performance
• Designations or recognitions
• Industry accolades or awards
• Any legal issues or reputation considerations

Some organizations select their suppliers based solely on cost, while others rely on additional influencing factors. Today, many leaders are re-evaluating their requirements to choose suppliers for the strength of their supplier base.

If your company uses RFPs, RFQs, or RFIs, view the proposals given to you. Focus on cost savings but also:

•  Look carefully at the TOCs
•  Analyze supplier strengths and weaknesses
•  Pay careful attention to the external environment
•  Factor in anything that could impact your engagement with the supplier
•  Study any trends that could potentially affect the longevity of your relationship

3. Negotiate negotiate!

After you’ve evaluated your potential suppliers and decided which relationships to pursue, it’s time to call your selected suppliers to the negotiation table. This is your chance to discuss responsibilities, expectations, price points, and contract terms. Take time to ensure both parties see benefits from the agreements. Once you’ve carefully crafted your requirements, it’s time to get your suppliers on board.

All relevant stakeholders from your supplier company and your own organization should be present during this process to ensure you can derive maximum value from the contract. This is especially important if your current supply chain is far removed from the day-to-day user. For example, if C-level executives or a specific department handles your company’s contracts, make sure to include them in the conversation for added insight and ideas for getting more value out of your supply chain.

4. Evaluate ongoing performance

Just like good relationships don’t end after the first date, neither do good supplier relationships.

In theory, if you’ve built your needs for selection, negotiation, and onboarding with mutually beneficial goals in mind, your relationships should be positioned for the long haul. But, without ongoing evaluation, how can you be sure? Your organization needs to be continually evaluating the performance of your suppliers.

Are they meeting your objectives and requirements? Do both parties see value from the relationship? Great! Your relationship is strong and can be nurtured to stay that way. Are you noticing that your supplier is dropping the ball when it comes to fulfilling their promises? Maybe your supplier relationship is worth revisiting. To periodically evaluate your supplier performance, you must have KPIs that are structured and consistent over time. This does not mean you should never change them, but the changes must be in the service of making your supplier management process more effective.

Strategies to improve your supplier relationship management process

No matter how well your supplier relationship is going, there is always room for improvement. Here are a few ways to improve your supplier management process:

Stop, collaborate and listen

Relationships are a two-way street and need to be treated as such. For your supplier relationships to succeed, you need to collaborate. When you clearly communicate your business goals to your supplier base, they will often offer ideas to provide your company increased value. You can leverage your shared expertise and synergies when you involve your suppliers in decision-making meetings. You may even find a solution you previously hadn’t thought of.

Be a helper

You should approach your supplier relationships with a helpful and generous attitude. When you treat your suppliers with respect and act in their best interest, you can establish trust and loyalty. Being in the good graces of your suppliers helps to eliminate the potential for incurred risk. Here are a few ways you can help them out:

• Identify risk to your supply chain—security, financial, data, operational, or otherwise
• Ensure cost-saving measures are safe from disruption
• Create resilient processes that can bounce back from problems quickly

Embrace a supplier relationship management solution

With a supplier relationship management solution, you can manage your vendors and create value for your partners from day one. With a solution like Tradeshift’s Engage platform, you can access tools and resources that facilitate valuable and efficient supplier relationships. Our network allows you to easily keep track of supplier information and interactions, ensuring communication is clear. Suppliers appreciate our adaptive onboarding process, and you’ll enjoy the added insight into transaction and payment analytics.

As your business evolves, so should your approach to supplier relations. Like any relationship, the more time you invest in it, the more structurally sound it will become. To learn more about how Tradeshift can help elevate your supplier relationship management process, reach out to our team of experts or sign up for your free demo today.