success in strong supplier relationships from Epiq Tech

Supplier Relationship Management

All successful companies build strong relationships with their suppliers. Companies are not isolated entities that simply purchase goods and services from individuals who happen to be able to supply them at that particular time. Companies typically make larger purchases. In reality, successful companies recognize the need to build bridges between their organization and the vendors that they work with by establishing strong buyer/seller relationships.

Supplier relationships are different from simple purchasing transactions in several ways. First, there can be a sense of commitment to the supplier. For example, if a vendor sells light bulbs, he can feel confident that the buyer will come to him the next time the company he represents requires a new shipment of light bulbs. Another element of these supplier relationships is advanced planning. Buyers don't just communicate with suppliers when a procurement need arises; they also contact them in order to discuss their future needs and to determine how best to satisfy those needs by working together.

While both of those distinguishing features are easy to spot, a third element is also important. The company's attitude and view of its suppliers matters a lot for business success. Companies that forge supplier relationships think of these vendors as partners and not just simple commodity providers. This difference in orientation can have a profound affect on the way an organization communicates and works with its suppliers. This in turn affect efficiency an profitability.

One ramification is a vendor’s knowledge of the buyer's business. When vendors are viewed as commodity providers, they generally don't take the time or are not given the opportunity to learn the details of the business or its vision for the future. However, vendors that are deemed to be partners are encouraged to become knowledgeable about the company, its processes, its products, and its goals. The result is greater buyer satisfaction with the services provided by the supplier. A study of IT directors found that vendors who were considered commodity providers delivered unsatisfactory service almost half of the time while suppliers who were thought of as partners delivered excellent service some of the time and good service most of the time.

Another result of this attitude of partnership and difference in knowledge level has to do with handovers, which is a top priority among most IT directors. After all, if the handover is unsuccessful or is poorly handled, it minimizes the benefits the business hoped to achieve with the project. Businesses that viewed their suppliers as commodity partners, according to the poll, viewed the way their vendors handled this critical process as unsatisfactory nearly half of the time. On the other hand, vendors who were considered partners handled handovers excellently nearly some of the time and good most of the time. Clearly, the change in attitude does make a significant difference.

Obviously, these two examples illustrate how important it is to have strong supplier relationships, but many businesses simply don't know how to foster an environment where purchasing personnel have an attitude of partnership with vendors. The change is not as difficult as they may think. It does not have to cost them the savings they achieve by shopping around either. First, businesses need to find a small number of suppliers to work with. Companies should carefully evaluate potential vendors and their backgrounds in order to select the suppliers from the group that will best fit the needs of the business.

After they pick these vendors, companies need to negotiate contracts with the vendors and to sit down with them in order to engage in some forward planning. Both of these steps are critical in establishing the stability in the supplier relationship that is necessary for both parties to feel comfortable. Furthermore, the future planning makes it more likely that the vendor will have the resources and qualified staff available when the buying company requires them.

Overall, vendors and buyers are both better served when they come together to form strong, mutually beneficial, and secure business relationships for non-commodity type goods and services. When these relationships exist, they can drive the growth and profitability of both organization and prevent purchasing and execution problems.

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