Most businesses rely, to some extent or other, on their suppliers. In businesses that involve manufacturing goods or selling them, the importance of a supplier might be paramount – but even in the case of primary industry, they can play a crucial role.
Given this, businesses should constantly be looking to optimize their relationships with suppliers and – where necessary – to seek out new ones.
What are the advantages of a well-managed supplier relationship?
There are several notable upsides to forging a good working relationship with your suppliers. For one thing, if you’re entering into a long-term relationship with them, or you’re agreeing to purchase a certain amount in bulk (even if you don’t have to worry about storing it in bulk), then you might be able to negotiate a substantial discount. This also helps to drive down price volatility, which can lower your risk in the long term.
An established and tested supply chain will also tend to be more efficient. Your workers will understand what the system looks like when it’s working, and your suppliers will get a better grasp of your needs. When issues do arise, they’re typically much more easily resolved.
In some cases, there might even be activities and tasks that you traditionally perform in-house, but which you can outsource to a trusted supplier. This will bring down your costs and, in many cases, drive up the quality of the work done. For example, you might have special requirements for quality control when you’re buying electrical connectors for your electronics product. When quality assessments are performed by the supplier, the cost of shipping defective materials can be lowered. This brings down costs for everyone.
How to judge whether a supplier is a good one
You might suppose that you already have a reasonably good relationship with your suppliers. But what objective criteria can we use to test this?
It’s worth coming up with a list of performance indicators. These might include things like costs. These come in several different varieties. There’s the price charged for the goods provided by the supplier and the extra costs borne by your organization – which might involve shipping, storage, and administrative costs.
The reliability of the shipments should also matter. Look at whether the amount of product shipped matches the amount you’ve ordered, and the proportion of the received product that is actually fit for use.
It’s more or less inevitable that, at some point or other, something will go wrong with your supplier. Here is where the great suppliers can truly shine. Pay attention to how responsive the supplier is when there’s a problem, and what steps they take to resolve that problem.
