Relationship Management

The best procurement is all about strong relationships with suppliers. I have learnt that successful organisations work closely with their suppliers.

The first step is recognising that your suppliers are not only vendors, but they are also your partners. This partnership should be based not only on financial transactions, but also on mutual trust and loyalty. If you make your suppliers feel like they are a part of your business, inform them about your processes, such as releases of new products and promotions, and listen to their concerns, and you will build mutual trust and loyalty.

Like most aspects of business, supplier management has been transformed in recent years, because of globalisation of the economy and the growth in technology. There are steps we can all take to develop a more collaborative approach which will deliver better value.

It’s important to communicate regularly with your suppliers. Keep them informed about your plans and your strategy so they know how it affects them and how they can help, factor in and benefit from your plans. If you appreciate their work, let them know, and if something is not working for you, bring it to their attention as soon as possible.

Make sure they are paid on time. This is how we all demonstrate that we are reliable customers. If you are unable to make payment by an agreed date, make sure you let the supplier now immediately and agree a new payment schedule. As we all know suppliers depend on payments on time to meet their own commitments and to ensure that they can continue to supply the goods and services we need in the future.

Getting a quality service with products and services at the right price is important for meeting your organisation’s objectives. If you have the financial flexibility, you may wish to use it to your advantage. Buying in bulk may get you better pricing, but you will have to invest more of your funds in stock. Sometimes you can arrange to pay a supplier earlier in order to get a discount.

It often makes sense to pay a premium for a better service if it means you can spend less time managing it. Choose the most efficient services for your organisation, where efficiency is a product of value, not just the cost.

A supplier relationship agreement is recommended if you buy from a supplier on a regular basis. It’s a formal agreement that covers all aspects of the contract between you and the supplier. This should include an item or service description, price, delivery terms and payment terms. A supplier relationship agreement reduces the risk of entering into a dispute with your supplier as the obligations of both parties are set out in contract.

Using a flow chart to explain the process to your team will help as everyone will understand their roles and can recognise if the supplier is not fulfilling its obligations. Experience tells us that organisations sometimes find that procurement agreements may be undermined because the roles and responsibilities in each organisation have not been clearly defined and actions are initiated that may add unnecessary cost.