The Little Things that Affect Supplier Relationships
In supplier relationships it’s usually the big things that get focussed on. But the little things, left untended, could have a much bigger impact.
“If you take care of the small things, the big things take care of themselves.”
Emily Dickinson
Communication. Honesty. Trust. These are the foundations of a strong supplier relationship and the criteria procurement focuses on to build high-performing strategic supply partnerships. But in focusing solely on these factors, there is a danger that procurement doesn’t give the little things the focus they need.
These smaller issues are easy to overlook as they have a lower risk profile and if something does go wrong there is usually time to fix them. Left unaddressed, however, the little things can grow into much bigger things and have the power to undermine the strongest relationships.
Here are a few of the less obvious things you can focus on to ensure you make a positive impact on your supplier relationships.
First Impressions
Think back to your most recent first interaction with a new supplier. Did you leave them feeling like you were looking for a lasting, strategic partnership? Or that they were simply the next call on your list?
It’s important to get the first interaction with a new supplier right as it sets the tone for the entire relationship. Get it right and you have the foundations for future success. Get it wrong and it may create ill feelings that can linger.
Whether your interaction is by email, phone or face-to-face, take the time to prepare, do research into the company and be ready to talk meaningfully about supply relationships. This will help the supplier see that you value their relationship and shows them the respect they deserve.
Transactional Mindset
All supplier relationships start out as transactional, only developing into strategic relationships in a small number of cases. This is common in procurement and stops unnecessary investment in relationships that don’t require it.
Issues arise where procurement continues to conduct their strategic relationships with a transactional mindset. This could be creating unreasonable expectations of the supplier, consistently requesting reductions in margins or changing work priorities, or just not putting in the work to develop the relationship. Strategic suppliers may accept this once or twice, but if it happens too often, it could be viewed as a lack of respect or value in the relationship.
Strategic relationships are designed to benefit both parties through working together to lower costs or come up with innovative solutions to problems. It’s not always what your supplier can do for you, but what you can do for them and what you can do together.
Stakeholder Relationships
Procurement may have the lead on supplier management, but it’s unlikely they are the only department interacting with suppliers. Finance, Engineering and even Senior Management may be having their own interactions – and they may not always be positive.
Most procurement professionals will be able to point to examples of specification changes, price agreements or negotiated payment terms that have happened without them in the loop. If procurement then has to walk these back, it can undermine a strategic relationship.
Clearly defined roles and responsibilities are required, with procurement as the key point of contact into the organisation. This should help procurement control communications better and aim to keep things on a positive footing.
Performance Management
Used well, KPIs can be a key factor in the success of a strategic relationship. The best way to ensure successful use of KPIs is by having them agreed and implemented by both parties. This ensures a clear understanding of the responsibilities on both sides and the outcomes in the event of poor performance.
If you want to add KPIs, change measures or start using data differently, it’s critical to involve your supplier in this decision. For example, there’s no use deciding in isolation to start measuring performance without informing the supplier. It’s likely to cause confusion (and more work for you), as well as potentially creating tension if you end up using the data to drive performance improvement (or as a stick to beat them with).
Payment
Cash is king for organisations, never more so at a time of global unrest and reduced income. Supermarkets, transportation and health care have all been criticised in the past for lengthy payment terms with suppliers, combined with late payment.
Procurement may not be ultimately responsible for actioning payment, but relationships will suffer if payments are consistently late. Strategic suppliers may cut you some slack on the strength of the relationship, but at some point cash flow issues caused by late payments will become a big problem.
Over time this will erode trust, with continuity of supply lost and suppliers less willing to go the extra mile or even do work before invoices are paid.
Procurement Team
Good relationships thrive on good communication and continuity. The essence of Category Management is that there is a single procurement representative managing the strategic relationships of the suppliers in that category. Good personal relationships between buyer and supplier help build trust and ensure good communication.
However, this good work counts for little if there is too much change in the procurement team and suppliers are constantly starting over with a new contact. Personnel changes are unavoidable, but need to be managed well to maintain these relationships. Try to avoid changing procurement leads unnecessarily, and if it is necessary build in a good handover period. There will always be change in the relationship, it’s procurement’s job to manage it well and keep things positive.
There’s no such thing as a little thing in relationship management unless you choose something to be that way. Take care of the little things, make sure they don’t turn into big problems, and the rest of the relationship should take care of itself!
