The past year has highlighted the gaps and inefficiencies in global supplier relationships. Breakdowns in communication, blindspots within the supplier base, and shocks to the supply chain brought into focus the importance of more agile, collaborative, and responsive relationships with suppliers.
But how do you get there?
Here are 3 ways to improve your supplier relationships and build a stronger, more resilient supply chain.
Enlarge the group of suppliers you work with
It probably comes as no surprise that priority focus and attention typically go to an organization’s top strategic suppliers. And it makes sense. When 20% of suppliers make up 80% of the spend, that’s a significant investment worth nurturing. The other 80% of suppliers (known as tail spend) only account for about 20% of the spend-a comparative drop in the bucket.
However, neglecting these supplier relationships is a mistake. Oftentimes, the most innovative and pivotal suppliers are smaller companies-even startups-within your tail spend that are producing key or specialty components. While they make up a relatively small proportion of your organization’s spend, they represent a valuable and strategic investment in your supply chain.
Therefore, building and prioritizing these relationships can be key to your organization’s future success as they continue growing and innovating.
Change the way you interact with suppliers
Interactions with suppliers are often limited to annual, surface-level interviews to review business items over the past year, including any inefficiencies, issues, and other operational challenges that may have occurred.
These annual conversations are important but insufficient.
Waiting until the end of the year to address issues is often too late and leaves your organization at a disadvantage. In order to remain competitive and mitigate risks, companies must be agile and proactive.
The key to responding to operational issues with speed and implementing signifiant (and necessary) change is building an ongoing relationship with your suppliers. In other words, don’t wait until the end of the year to discuss issues. Whenever a problem arises, open a dialogue with your supplier to address it.
Schedule regular, built-in check-ins with your suppliers to follow up.
Use these conversations not only to review your supplier’s performance but to uncover how you’re doing as a partner.
- How have they liked working with you?
- What could be better?
- How can you help with sustainability goals?
Treating these conversations as a two-way street builds trust and invites greater collaboration between supplier and buyer.
Site visits are also an important opportunity to develop stronger supplier relationships. These are particularly useful for larger strategic suppliers who may rely significantly on your business. An annual or semi-annual site visit can give you context and on-the-ground knowledge of your supplier’s operations while providing valuable face-time with their stakeholders. Consider bringing together multiple stakeholders on their side and your side to create relationship foundations and expand those relationships going forward.
When you develop ongoing relationships with your suppliers through regular conversations, consistent follow ups and periodic visits, operational challenges can be dealt with right when they happen-instead of months later-and risk mitigation can take place more quickly and more efficiently.
Redefine how you gather, analyze, and share supplier data
During procurement when you identify and assess potential vendors, expand the type of supplier data you gather and analyze. Typically, the data organizations focus on is too narrow and is used to check boxes rather than develop a holistic understanding of the supplier. Not only does this prevent procurement from building a clear picture of the supplier-and potential risks-but it makes it difficult to communicate supplier context outside of procurement. As a result, the data remains siloed and the business loses important insight into their supplier landscape.
For example, procurement often looks at metrics like cost, quality control, capacity, and performance. But these data points are incomplete. They don’t tell you the long-term indicators of the relationship.
You need data that contextualizes the relationship and answers important questions such as:
- How innovative is the supplier?
- Is there enough of a relationship that they will innovate with you and make those innovations available to you?
- How are they going to grow with you, expand, and innovate?
- How do you rank on their list as a customer?
- Are you top priority?
- Are they working with your competitors?
- What happens when there is disruption?
- Will they guarantee and honor your contract, or will you be deprioritized?
These types of questions require deeper data gathering, analysis, and cross-functional collaboration. Collect data from your suppliers as well as external data sources. Reliable, external data sources can help you validate supplier-provided information and also expand your supplier view so you can ask more specific questions and dive deep into other areas.