by Jennifer Ulrich, Project Manager
In the February issue of Strategic Sourcing New and Views we talked about understanding the difference between preferred suppliers and strategic suppliers, and how to ensure that you are deriving the most from vendor relationships. In my experience as a sourcing professional I have found that managing relationships with suppliers can be quite trying at times, but if done properly, can be rewarding as well. In this edition of “In the Trenches,” I will share some instances where conflicts might arise or opportunities are available to seize, and some thoughts on how to address each.
Honesty is the best policy. One particular situation that comes to mind is during the initial stages of a sourcing initiative. It is important to be honest with incumbent suppliers about your goals and what you are trying to accomplish. You should also be sure to clearly explain what the next steps are, for instance if you plan to reach out to alternate providers for pricing comparisons. In doing so you avoid blindsiding a business partner and potentially creating waves in what was otherwise a stable relationship. You can explain that just because you are looking elsewhere does not mean that you do not appreciate their services, but that it is your responsibility to do your due diligence on behalf of your organization.
Continuous improvement and expanded opportunities. In some cases you will find that the current suppliers have additional capabilities outside of the specific services or products they are currently providing. One way to encourage growth of a successful relationship is by meeting with suppliers on a regular basis to ensure that you are taking full advantage of the opportunities that they have to offer you. Just as your organization is trying to optimize through cost reductions, your suppliers are often expanding by adding new options to their service or product offering. By bundling additional services or product categories you can seek deeper discounts as well as streamline processes through vendor consolidation. Finally, by simply having these meetings with your supply base you show them that you value the relationship and are looking for ways to expand it further.
Relationship dynamics are important too. When you first engage with a new supplier, setting the tone for the relationship is critical. What are you looking to gain from this new partnership? Is this a long-term engagement? If you indicate upfront that you are looking for continuous improvements through cost savings, process efficiencies, and up to date information on the latest technologies, then you establish a clear dynamic that can lead to a mutually beneficial relationship throughout the term of the contract. As a purchasing professional it is important to not only identify goals but to track results as well. Your supply base can also be an asset in this effort by helping to develop reporting that demonstrates cost savings or process improvements through their involvement. All of these points should be considered when initially developing the relationship.
These are just a few examples of ways to manage supplier relationships. For more information on supplier management tips and sourcing spend categories yourself, look for our book, “Managing Indirect Spend: Enhancing Profitability Through Strategic Sourcing.”