Supplier Relationships Current SCM

In any business, a lack of competitive insight is detrimental to its coordination and efficiency. That fact is understood by employees from frontline workers to CEOs. However, there is a less appreciated aspect of a business is just as integral to its day-to-day operations: supplier relations. 

The rise and ongoing decline of COVID has brought with it significant disruption in the global economy. These disruptions, particularly within supply chains, has given us abundant examples of the critically important frameworks and services that suppliers provide. In fact, if the recent economic turmoil has taught us anything, it’s that business and supplier relationships need to become stronger than ever.

This will require strengthening the interorganizational relationships between business and supplier, as well as increasing the visibility and coordination of daily operations. Transactions, processes, payments, delays, and the host of actions that coordinate a supply chain will need to be understood intimately by both sides of the procurement process if a business is to brace itself against future market turmoil. 

Like many aspects of a business’ supply chain, the hub of the process is your procurement team. They will be the driving force of change if you want to reorganize or strengthen your cooperation with suppliers 

While there are many solutions to strengthening supplier relations, maximizing procurement efficiency, or increasing visibility in 3rd party relations, we’ve listed three tried and true techniques to maximize supplier relationships. 

Suppliers Current SCM

Ensure the Continuity of Supply Chain 

After the turmoil of the last three years, any professional procurement team will be demanding a more robust and agile supply chain. The goal being overall reduction in risk by ensuring the smooth flow of project materials. One of the major hurdles to this risk reduction is that in the current state of supply chain management, suppliers often have a much stronger bargaining position than the customer or procurement team.

Not only will a business have difficulty finding new suppliers to fill gaps in their procurement process, but those new suppliers will have increased prices due to both bargaining power and inflationary pressures. These factors will demand procurement teams strengthen their current supplier relationships before turning to other supplier options. This lack of supplier options in turn reinforces the importance of improved supply chain management. 

In a new economy rife with supply chain disruption, supply continuity must come from the diligent work of procurement teams. They must work closely with their suppliers to review their supply chain stability and identify the weaknesses and risk junctions that threaten the efficient flow of materials. With practice, and a proactive supply management plan, procurement teams will begin to spot problems long before the company suffers any losses of efficiency.  

This transparency of supply chain between procurement and supplier is unlikely to occur organically. There must be some level of incentivization and relationship management on the part of procurement. Ideally, truth-based partnerships will be built from legacy suppliers who have already formed a working relationship with the business. It is more likely that procurement teams will need to invest the time and effort to engage in information sharing and cooperative problem solving with suppliers whenever possible.

Even simple activities like submitting POs should be seen as opportunities to improve a supplier’s perception of the company. If there are methods to improve supplier operations, then procurement should share that information, even if they may not directly benefit from it. 

Supply Chains Current SCM

This information exchange and efficiency is a particularly important area for project management software. By using a software that streamlines these day-to-day processes with a supplier, you not only increase supply chain efficiency, but increase the positive perception of your business. With such software you can: 

Getting Your Payment Process Rock Solid 

Payments and payment systems have always been an integral part of the supplier-business relationship. Yet there have always been struggles with getting that process down to an efficient transaction. Often transaction issues can come from two common sources: 

ERP system failures: 

  • ERP (Enterprise Resource Planning) systems are incredibly useful, but they do not have a procurement-oriented approach to payments. Managing all payments through an ERP may seem more efficient, but the inflexibility of the software will inevitably clash with the fluid nature of project and supply chain management. This is in part because ERPs are not created with the supplier in mind. ERPs do not communicate with suppliers and will not update them on the status of payments or shipments. Automating payments for 3rd parties can reduce the workload on finance and accounting teams while also improving communication between supplier and firm. Even complex activities like bidding can be streamlined by non-ERP software solutions. 

The business protecting their cash accounts: 

  • Managing payments has always been challenging. But a supplier has the right to expect and demand payment on time and in full. With supply lines stretched and companies floating more cash reserves to cover supply issues, many organizations find themselves in the uncomfortable position of delaying payments due to poor risk management and inefficient procurement tracking. This disorganized payment process represents an internally created risk that companies should strive to end. Each time a supplier sees a missed payment, an organization risks losing reputation or suffering increased prices. Perhaps the worst outcome is losing the supplier altogether.  

Adopting a ‘procurement first’ payment system that tracks and maintains the due diligence required to ensure payment is a relatively simple and effective way to deleverage risk and improve supplier relationships. 

Finding a solution for payments that are up-to-date, accessible, and constantly informative is critical for effective supplier relationship development. 

Understanding the Different Types of Supplier Relationships 

Nothing in business happens in a vacuum, and relationship building is no exception. It is not only the procurement team that is going to be engaging with suppliers. There are going to be multiple other business elements which will be responsible for maintaining and improving 3rd party relationships. That is why procurement teams will have the added responsibility of educating other business elements that interact with suppliers on their importance and how they integrate with the organization. Stakeholder analysis, risk assessment, and supply chain analysis will be excellent resources to onboard organizational stakeholders on the importance of these supplier relationships and how they can be improved.  

Due to the critical significance of suppliers in many industries, the relationship management the non-procurement personnel engage in will be of either great benefit or detriment. Because so many business processes will rely on suppliers, general supplier management will constitute an area of great impact for the monetary health of a business. Executive level personnel should also strive to understand the importance of suppliers on corporate goals like competitive advantage, risk reduction, business agility, and adaptiveness. To maximize the effectiveness of supplier relationship management, broad company objectives should reflect the importance of maximizing the efficacy of these critical business relations. 

Supplier Relationship Building Current SCM

Interested in reading further on the benefits of suppler relations? There are excellent resources to develop strategies and gain knowledge, including: 

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