handling supplier management relationships from Epiq Tech

Supplier Management Relationship

For all the talk about supply chains and e-procurement, many companies still have not seen the real benefits of either of these business approaches. The reason is not the technology. The reason is that dealing with suppliers and managing that relationship can be tricky even under the best of circumstances but when they add in more technology and major changes, things can might become even more tricky. However that doesn't mean companies should switch to more modern methods of handling procurement and working with vendors, it just means they need to become more knowledgeable about how to effectively manage their supplier relationships.

One of the first steps of creating a supplier relationship is, of course, choosing the supplier. When companies switch to an e-procurement method they usually need to streamline their supplier choices and these choices need to be based on more than just a quoted price. For example, it may cost Vendor A $20 to ship goods and it may cost Vendor B $40, but if Vendor A doesn't ship to all of the cities a business works with, doesn't have the technology based installed to make communication seamless, and doesn't offer any value-added services to the deal, then that low price may look a lot less appealing.

Up until recently, many buyers weren't looking at things in those terms and were simply focused on the quoted price. Many of those buyers also found out the hard way that low price sometimes equals low quality. Offshoring, for instance, has occasionally resulted in defective products rates just below 10%; which is much too high. When these disillusioned buyers switched to slightly more expensive suppliers, there was a lot of resentment toward suppliers in general already. Supplier resentment does not create a firm foundation for a new supplier relationship. Buyers need to remember that how they treat suppliers today is how suppliers will treat them in the future, and for many buyers this might be a frightening thought.

Another way to boost supplier relationships is through technology. Setting up a strong communication network that allows for the real-time transfer of information in both directions helps create a feeling of partnership that is normally missing from these relationships. Explaining to suppliers how they will be helped and how important they are to the big picture can also help make them feel more comfortable in the relationship. Opening up communication to allow suppliers to view forecasts, inventory, and performance ratings further builds on the foundation and makes the relationship more secure.

Furthermore, companies can do more to ensure that their suppliers are receiving their business. When businesses establish e-procurement arrangements, suppliers assume that they will receive the orders for all of the products needed by that company from their catalog. An office supply store, for example, anticipates that the company will order their pens, envelopes, and office furniture through them. However, many companies have found that employees who are resistant to the new technology continue to go out and make purchases outside of the system. This problem can hurt the vendor/buyer relationship because it is taking away profits from the supplier. Businesses, therefore, need to take steps to ensure that those types of “maverick” purchases do not occur.

Finally, both sides of the relationship need to realize that things won't also be perfect. Some products won't live up to buyer expectations; some invoices won't be paid correctly. However, those types of problems can be minimized simply by ensuring that a four-way inspection process is in effect on the buyer's side so that the goods are checked according to the order form and that the invoices are paid promptly. Additionally, buyers and sellers should decide in advance on how to settle problems with defective goods or overall buyer dissatisfaction. Knowing how to handle difficulties helps rectify the problems easier and makes the relationship move more smoothly in the long run.

Experience Epiq in Action.

Schedule a demo.

Book demo

Want to chat?

Contact Sales