A few weeks ago at Iasta reSource Indianapolis, I hosted a roundtable titled, “What is Supplier Relationship Management? Discuss supplier partnerships that inspire, improving communication.” We had a great discussion around supplier relationships, so I wanted to share some interesting discussion points that could help you to start thinking about what supplier relationship management really means in your organization.
A common issue procurement teams face when managing supplier relationships includes coordinating with stakeholders to ensure the relationship is going well for all parties involved. Procurement could feel positive about a supplier when they’re unaware that a supplier isn’t delivering on time, or their quality rating is much lower than average. The supplier may also be disgruntled with the buyer organization because they aren’t getting paid on time, where Procurement wouldn’t necessarily have that information immediately on hand. Sometimes, stakeholders think highly of their suppliers even though they aren’t meeting expectations set forth in the contract. Aligning supplier metrics with stakeholder buy in can be difficult. Gathering important metrics from stakeholders to make informed decisions about suppliers can also be difficult.
Additionally, resource constraints cause procurement teams to manage suppliers in intelligent ways. The group focused largely on a discussion around tiering suppliers in a way that allows teams to bucket and focus on the strategic or high risk suppliers. Some suppliers could be exchanged easily in the business, whereas others are more integral to the business and need to be protected. The general consensus at the table was that the number of pivotal suppliers was relatively small comparative to the number of supplier relationships overall across the organization. Therefore, closely managing these suppliers could be doable for any team. Managing these relationships can be handled in different ways, including conducting quarterly business reviews, where the buyer organization rates the supplier on pre-defined criteria. The supplier is also able to rate themselves and the buyer organization, to provide feedback regarding the relationship from their perspective. This keeps the relationship healthy and long-lasting.
Remember however, suppliers also have tiers of clients – those that are more profitable or strategic to their business as well. It’s important that the supplier and buyer are aligned in how they view each other. Issues stem from labeling a supplier as “strategic” when they consider you as a tactical buyer- an easily replaceable relationship. You may be attempting to orchestrate initiatives that the supplier won’t be interested in putting in the effort.
How does your organization collaborate with suppliers and effectively manage the relationship? Share your tips and best practices by commenting below or tweeting @iasta.