Supplier relationship management: Making the most of vendor relations

Supplier relationship management

Supplier relationship management (SRM) is the process of evaluating suppliers and identifying which relationships are essential to effectively and efficiently do business. In many organizations, as their supply chain grows, the relationships with suppliers become more complex. Supplier relationship management helps companies ensure that they invest in the relationships that contribute to and matter most for their success. Below we discuss the importance of supplier relationship management, the kinds of relationships you might have with suppliers, and ways you can work to strengthen your relationship with your current suppliers.

The importance of supplier relationship management

As with any relationship, both parties strive to build value and profitability. The relationship you have with your suppliers can have direct benefits on the efficiency and productivity of your supply chain. After you have begun cultivating a strong supplier relationship, you need to stay on top of managing the relationship to ensure it flourishes.

With a successful supplier relationship management strategy, your organization can see benefits such as:

Reduced costs Just like with employee turnover, having to replace a supplier can be costly and time-consuming. When you invest time and resources into maintaining your existing suppliers, you can save money on sourcing, onboarding, and negotiations. Take a look at your existing vendors and evaluate whether your relationship could thrive in the long-term. Do they have the capacity to meet your current and future needs?

Increased efficiency As with every relationship, the more time you invest in it, the more well-built it will be. When you take the time and effort to create a strong and reliable supplier relationship management process, you can identify parts of your relationship that work well and the areas that could improve. By keeping accurate records and managing your relationship with vendors, you can make sure your relationships remain profitable. Over time you’ll notice that communications improve, and your goals will align more closely.

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Types of supplier relationships

There are two main types of supplier relationships. Identifying which type of relationship you have with suppliers will help you effectively manage your expectations and align your goals.

In a vertical supplier relationship, the supply chain is linked in the traditional way between sellers and buyers.

Each party places emphasis on ensuring individual and supply chain goals are achieved. Examples of vertical supplier relationships include distributors, retailers, manufacturers, and suppliers. These relationships are often involved frequently, with many providers operating together day-to-day.

Horizontal relationships are those that are created between organizations that work in conjunction.

For example, the supplier for brake pads and the manufacturer of tires both provide parts to the car manufacturer. These suppliers work together to achieve mutually agreed-upon goals, and therefore they partake in a horizontal supplier relationship. Horizontal supplier relationships are built on a foundation of mutual trust and shared risk. With each party specializing in their specific aspect, the integration of their processes leads to shared success.

As with every relationship, there are a variety of levels or depths of involvement. The extent to which you are involved with suppliers is based on the intended outcome of the relationship.

The three levels of involvement are:

  • Vendor — These relationships are primarily transactional. In this situation, both parties are represented as a buyer or seller, with little or no collaboration during the process outside of the transaction.
  • Strategic Alliance — Strategic alliances are more entwined. In this relationship, both organizations collaborate and modify their processes to help achieve their goals. In this scenario, the relationship is more strategic rather than transactional.
  • Partnership — In partnerships, both parties work closely together to customize their business strategies to produce positive results. These outcomes are generally more successful than anything either part could achieve individually.

Why organizations should be concerned with supplier relationship management

Aside from the benefits we listed earlier, organizations should concern themselves with their supplier relationship management process to ensure they retain the relationships they already have. It is usually more cost-effective to invest in keeping a relationship going than to source and start a relationship from scratch.

Improved value Just with any project, the more time and effort you put into something, the better, the end result will be. When organizations focus on creating value for their suppliers, their relationships flourish. A structured SRM system automates busy work so that you can spend more time fostering strategic relationships with suppliers. Your SRM system stores the data you need granting you access to insights to help aid you in decision-making. This greater visibility allows you to identify issues before they arise, creating a resilient and valuable relationship.

Loyalty When you invest in your relationships, they invest in you. Having an SRM system to help you manage your suppliers creates a positive supplier experience, making them more likely to continue their relationship with you. Finding good suppliers can be tricky. It is much easier (and cheaper!) to spend time ensuring your existing suppliers are supported with your relationship.

How the Tradeshift platform optimizes supplier relationship management

Tradeshift revolutionizes supplier relationship management with Tradeshift Engage. With our digital portal, vendors can see value in their relationships with you from day one. Rather than just push your suppliers through automated portals, Tradeshift Engage allows you and your suppliers access to collaborative tools and analytical capabilities to help you create a highly efficient and strategic supply chain.

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Users choose Tradeshift to support their supply chain operations because of our:

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Better data Tradeshift Engage’s analytical capabilities gives sellers a quick dashboard view of payments and transactions. When integrated with Tradeshift network’s data, suppliers will enjoy access to all of their data in one place. This organization leads to fewer inquiries and a more efficient process. Our answers to your questions come faster, are more in-depth, and provide more clarity than anywhere else.

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Enhanced collaboration Giving your suppliers a personalized experience right from the start, Tradeshift Engage strengthens communication by storing and consolidating conversation history. Users can easily collaborate on tasks, attach necessary documents, and search for old records, all within our digital platform.

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Embrace of digitization The Tradeshift network acts as a digital hub to support and assist with your supply chain needs. Suppliers enjoy access to our powerful digital tools, improving their processes and capitalizing on new opportunities. Plus, when suppliers sign up for Tradeshift Engage, they also gain access to our online payments portal, helping you secure payments more quickly.

Start investing more time and effort into cultivating strong supplier relationships. To learn more about how Tradeshift Engage can assist with your supplier relationship management, reach out to one of our experts or sign up for a free demo now.

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