How to improve your supplier relationship management: Good practices and bad habits

Supplier relationship management (SRM) plays a key role in the overall performance, and success of companies. Good supplier relationships ensure regular supplies, optimal product, or service quality, as well as efficient collaboration. In other words, this impacts strategic issues relating to differentiation and competitiveness in the market. To build solid, trusting relationships with suppliers, it is important to adopt best practices and avoid some bad habits.

 Establishing a clear framework

The first step to improving supplier relationship management is to establish detailed contracts with suppliers and define precise operating rules. The aim here is to avoid any misunderstandings and/or claims in the future.

Clearly defining expectations

It is important to clearly specify expectations in terms of quality, delivery times, quantities, safety standards, payment terms, etc.

In addition, the conditions that will assess if commitments are met should also be outlined, as should the conditions relating to the termination of the contract in the event of any problem that would disturb the company’s collaboration with its suppliers.

 Implementing a conflict resolution method

A company can provide conflict resolution solutions in the event of a dispute, such as mediation or arbitration via an independent expert. It is crucial to have amicable solutions available to maintain strong relationships with suppliers, even in the event of disagreements. The procurement team can also be trained on these topics.

Defining a governance framework

This involves appointing a person within the procurement department to be responsible for day-to-day management of the relationship with each supplier. It is also necessary to identify all stakeholders involved within the company (internal customers, management, accounting, supply, etc.).

Ensuring effective communication

Once the contractual framework is defined, regular, transparent and effective communication becomes critical for optimal supplier relationship management.

Implementing clear and regular communication

Setting up regular meetings with suppliers to discuss their performance, any problems encountered and improvements to be made is a must. The company also has every interest in adapting the frequency and the type of their meetings to the supplier’s status (strategic, preferred, developing, conditional, etc.). To maximise effectiveness, each meeting must be

carefully prepared, with a set agenda and a detailed record of what went on to facilitate monitoring.

 Focusing on information sharing

Transparency is vital to establishing a climate of trust. Both parties must share as much relevant information as possible. For the company, this includes ambitions, order volumes, sales forecasts and changes in business strategy, for example. Such visibility enables suppliers to better understand their customers’ needs and thus meet them even more precisely.

 Using digital tools

In the era of digital revolution, it is almost imperative to implement Supplier Relationship Management software within the procurement department.

This supplier relationship management technology makes it possible to:

· Maintain a single supplier relationship file;

· Manage legal documentation;

· Automate the updating of supplier data;

· Analyse costs;

· Etc.

A SRM software is an essential tool to get a 360°, in real time, vision of the supplier relationship within organisations and to evaluate supplier performance.

Considering the supplier relationship on the long term

Supplier relationship management is part of a continuous improvement approach. After laying the groundwork for a good supplier relationship, the challenge must continue.

 Maintaining balanced relationships

As part of supplier relationship management, it is necessary to ensure that the partnership is a “win-win”. As with any type of relationship, each party must find it worthwhile, fulfil their commitments and invest themselves according to the issues that were previously defined.

For the company, this includes complying with supplier payment terms. Without this, the contractual relationship cannot last and risks disrupting the smooth functioning of the supply chain.

 Progressing together

When two business partners contribute to promoting each other’s activities, the benefits are multiple.

By cooperating with their suppliers, procurement departments can:

· Stimulate innovation;

· Create value;

· Increase their company’s turnover.

To quote a procurement manager working for a major retail chain: “Supplier invoices become receipts.” Whether it’s joint training, optimisation projects, co-innovation or co-development, anything is possible.

(Inset) For long tail spend, which involves significant administrative costs, partners have every interest in working hand in hand to optimise procurement and cost reduction processes. It concerns, for example, supplier rationalisation projects, digitisation of transactions or quality management.

Being open to other perspectives

Even if a company is satisfied with its current suppliers and has no particular immediate needs, it should not close itself off to potential new prospects. Within the limits of the resources available to the procurement department, it is always interesting to meet potential new suppliers.

By definition, supplier relationship management consists of a company building harmonious, effective long-term collaboration with its strategic suppliers. By following this practical advice, procurement departments have the keys to achieving success. This is how they will be able to successfully create solid, reliable and lasting supplier relationships.

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