Effective Supplier Relationship Management: Strategies for Building Strong Partnerships

Every organisation wants the very best from their suppliers – favourable prices, quality products, and reliable service. Yet, many businesses underestimate the extent of their dependence on their suppliers and they overlook another factor too – their business may not be as important to their suppliers as they think.

While some organisations expect preferential treatment based on their reputation or size, it’s essential to acknowledge that suppliers operate within a broader ecosystem.

Raw materials scarcity, resource depletion, geopolitical tensions and intensified competition can quickly upset supply and demand patterns. In this era of global interconnection, organisations are increasingly finding themselves less in a position to demand services and more in competition for access to key materials and expertise. The reality is that suppliers may no longer be grateful recipients of your business opportunity. Rather they are becoming discerning partners assessing the value they derive from the relationship with you. 

The shift to a partnership-centric approach

In this context, a critical factor emerges – the supplier’s experience of doing business with you. It’s no longer solely about what you want from them, it’s also about their experience when dealing with your organisation. Recognising and responding to this paradigm shift is pivotal for creating healthy, sustainable supplier-customer relationships.

Prioritising supplier expectations

So, what does a supplier look for in a customer? Communication, collaboration, trust and partnership most often top the list. Most suppliers prefer customers who offer consistency, reliability and predictability. Prompt payment of invoices is another significant factor as it helps suppliers manage their cash flow and operating expenses. Suppliers may also be interested in customers who show potential for growth, as this can lead to expanding business opportunities. Some suppliers welcome customers who are open to collaboration and innovation. Of course, suppliers may prioritise these factors differently based on their industry, size, and specific business goals  but it does underpin the importance of understanding and aligning with your suppliers’ expectations and needs.

This partnership-based approach does what the more traditional transactional one cannot – it fosters collaboration and mutual growth. It signals to suppliers that they bring more to the table than just goods or services, they also offer expertise, innovation, and market insights. And it acknowledges that the supplier’s perspective is instrumental in shaping long-term, mutually beneficial relationships.

How to build a positive supplier experience

This is not a one-sided arrangement either. A positive supplier experience can be directly correlated with the longevity and strength of the supplier-customer relationships. When suppliers have a favourable experience, they are more likely to prioritise the customer’s orders and needs. This includes providing better service and support, offer competitive pricing and terms, communicate more openly and be open to collaborative efforts and innovative solutions. In contrast, a negative supplier experience may lead to deprioritisation, delayed orders, higher costs, disputes, and strained relationships. 

A good supplier experience isn’t something that just happens and becoming a customer of choice cannot be achieved through ad hoc communication. It takes a solid supplier relationship management strategy backed by articulated objectives and a well-devised tactical plan.

It also requires cultivating personal relationships with suppliers to build trust and mutually beneficial partnerships such as involving suppliers in jointly developing innovations or key initiatives. Leadership must also be on board, aligning the team with the goals of the program and the value the program will bring to the organisation. 

Here are several proactive steps (backed by statistics from a 2022 survey by HICX) that should be included within the wider supplier relationship management strategy:

Communication issues top the poll when suppliers were asked what enables a good working relationship with an organisation. Be sure to maintain open and transparent communication at all times and regularly seek feedback to understand any friction or areas for improvement.

33% of suppliers log on to 10 or more systems per client and report burdensome administrative tasks. Many organisations lack a cohesive, integrated place for suppliers to find useful information. Consider deploying unified technology solutions – such as supplier portals or electronic invoicing systems – to streamline interactions and improve efficiency. And support ease of doing business by simplifying procurement, order management, and payment processes.

When suppliers are asked what would most improve the relationship between themselves and their most important customers, they cited joint collaboration and innovation as their second most priority. Involve suppliers in decision-making processes and seek their input on product innovation, development and supply chain optimisation.

Fast or on-time payment came in last on the survey priority list, but it makes good business sense to adhere to fair and ethical business practices such as timely payments and compliance with contractual agreements.

Prioritising and actively managing the supplier experience is a win-win strategy. It not only strengthens long-term relationships but also leads to better supplier performance, cost savings, and enhanced collaboration.

Organisations that invest in creating a positive supplier experience position themselves for sustained success in today’s complex and interconnected business environment.