5 golden rules to keep a good Supplier Relationship
In these difficult times, it is more than ever necessary to maintain regular contact and create a good relationship with your supplier.
Although often put aside, a good supplier relationship is a major growth driver, essential for the growth and the success of your business. In this article, we will give you the golden rules to follow in order to establish a healthy, lasting, reliable and high-quality supplier relationship.
What is Supplier Relationship?
Any type of business needs suppliers to ensure every step of production and supply of articles, goods or services that are meant to be transformed or used. These suppliers play an important role: they serve as an essential intermediary.
The supplier relationship is defined by the relationships that a business has with each of its suppliers. It is based on:
- Mutual trust (with made agreements, observation of deadlines and payments, etc.);
- Quality interactions (regular contact) ;
- Constant listening and attentiveness (production schedule);
- Financial terms (payment for invoices).
Therefore, it is important to keep a healthy and cordial business-supplier relationship to ensure the smoothness of your business and logistic processes, the final purpose being to achieve maximum customer satisfaction, a key factor for any business wishing to grow.
Rule #1 : Identify reliable suppliers
Beforehand, running a supplier “sourcing” is essential to obtain information about future suppliers: are they reliable?
By contacting their clients or by browsing reviews online, you can get a first glimpse of their practices:
- Quality of products and services delivered;
- Observation of production and delivery deadlines;
- Geographical distances;
- Price competitiveness;
- Order tracking;
Having one single supplier for all of your supplies can be risky especially if your supplier happens to run into inventory, delivery or production issues. Diversifying suppliers allows you to rely on another one if one of them is facing issues.
Then comes the negotiation part. Both parties must take advantage of it. Set your conditions: what are the criteria and demands that are not negotiable? To what extent are you willing to make concessions?
Rule #2 : Use official conventions
In addition to the contract, it is crucial to put in writing clauses that will safeguard your goals:
- financial clause: to pay and be paid in time;
- legal and contractual clauses: compliance with the Law, transparency of termination conditions, potential non-disclosure clauses, sanctions in case of dispute;
- operational clause: observation of production and delivery schedule, quality of products and compliance of services.
A supplier charter to ensure responsible practices
In the United Kingdom, the Home Office and HM Revenue & Customs published a Policy Paper known as the Supplier Charter which refers to all Corporate Responsibility issues for wider environmental, social and economic policy objectives. It embeds responsible practices through the supply chain for businesses and serves as a template for any British company.
Other codes exist
Any business is free to instate a supplier Code of Conduct or Code of Ethics, a widespread practice in the USA (for an example, click here) and in the UK. These codes will include the company's shared values, policies and practices with its suppliers, such as promoting corporate social and environmental responsibility, responsible sourcing, health and safety, etc.
Rule #3 : Create mutual trust
Signing a contract with specific clauses is essential but it's not always enough to prevent potential risks in production or delivery. As a buyer, you need to be attentive and willing to renegotiate your terms in order to adjust to a whole new situation.
What's more, recommending a trusted supplier to one of your clients or partners can greatly improve your supplier relationship, a win-win situation for every party through the sharing of network, influence and reputation between one another. Later, you could even take advantage of it by asking to renegotiate your supplier contract to your benefit!
Rule #4 : Favor quality dialogue
Have a discussion with your supplier on a regular basis to stay updated with their current situation, issues of failures they might be facing. This will allow you to anticipate the majority of problems and implement solutions and strategies in full collaboration. Cooperation and dialogue will be a major boost for mutual trust and smooth operation of your business.
Always tailor your communications to suit your recipient (small or large business). Try to set up face-to-face meetings as often as possible for more pleasant and constructive discussions. And when you chase up your supplier, anticipate and get in touch with them in person (whether it is on the phone, video call or face-to-face). Finally, use tact and diplomacy, all the while standing firm.
Rule #5 : Manage your inventory and know when to reorder
Good inventory management (which goes hand in hand with good organization!) will allow you to reorder at the right time and avoid being overcome by panic which would be a nightmare for both you and your supplier. Organize and manage your inventory thanks to:
- A safety stock (and reorder point);
- A real-time view on your inventory;
- Reporting and analysis tools;
- Automation for the creation of your documents.
A good inventory management software will help you automate these features. You will save time and protect your supplier relationship.
In conclusion, a healthy supplier relationship is based on transparency, lasting trust, regular contact and business cooperation that benefit both parties. An essential partnership that rests on active communication.
Today, there are many solutions to facilitate discussions with your suppliers and save time, particularly using automated invoices and sales orders. With Erplain, in just one click, get orders, quotes and invoices. Manage your inventory in real time and anticipate supply reorders.
Want to know more? Contact our product specialists.