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Investing in Supplier Relationships

Yale University business professor and author, Dr. Barry Nalebuff, has explained it, “Only recently have people begun to recognize that working with suppliers is just as important as listening to customers."

Like any relationship, supplier relationships require investment. If not proactively managed, the resulting weakened supply chain poses a risk for any enterprise. On the contrary, if managed effectively, a strong supplier network can be an operational strength and competitive advantage.

As supply chains grow increasingly complex, it's important to maintain profitability and drive operational efficiency. In order for operations to run smoothly, organizations need to know that their suppliers will deliver on their promises and meet demands. It all starts with customer relationship management. In order to deliver customer satisfaction, organisations must also improve the satisfaction of their suppliers beyond the financial value they bring.

Supplier relationship management is a methodical approach for developing and managing partnerships successfully. It focuses on shared growth and value creation based on trust and communication. Supplier relationship management benefits all culminate in a healthier bottom line.

Developments in the business landscape have become more difficult to anticipate due to demand globalisation and supply markets, shifting consumer behavior, and shorter product lifecycles. Accordingly, outsourcing, procurement and supplier management have become more important and strategic.

Here are some of the most important objectives in supplier relationship management we have seen.

1. Leveraged Capabilities

Leveraging supplier capabilities helps create a mutually beneficial relationship. Historically, a majority of business activity was kept in-house such as product development. Now, in the shifting business landscape, many traditional tasks are now available for outsourcing. Leveraging access to resources, insight, and talent are key to this objective. Vendors can help save money on manufacturing, avoid quality problems, recover from supply chain disruption, or seize new opportunities. Engaging in strategic partnerships with suppliers can net big gains.

2. Reduced Cost

Organisations and suppliers can created shared value and goals for long term cost savings and to provide a better service for the end user. Benefits can now be realised and shared with collaborative partners. Healthy relationships with suppliers will not only deliver cost savings, they will reduce availability dilemmas, delays, and quality issues.

3. Supply Security

Due to the globalisation of supply chains, supply and demand fluctuations and material scarcity has become a challenge for companies to forecast product accessibility. Clients should aim to become a customer of choice in order to reap the benefits of preferential treatment regarding availability, costs, access to technology, innovation and risk reduction.

A long-term relationship between supplier and buyer allows for the free-flow of valuable feedback. Over time, this will create a more responsive, effective supply chain that could have a positive impact on both costs and customer service. Working together with a supplier, a company can tailor its supply chain to meet individual needs. Processes can be consolidated, costs can be reduced and the end product for the consumer can be improved. Through a combination savings and efficiencies, companies can create a healthier bottom line.

Keep in mind, it's better to be working together with suppliers than it is to be fighting against them. Supplier relationship management should focus on delivering value to the supplier to become the customer of choice.

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