Five steps to bolstering supplier relationships

Businesses that survived the Covid-19 pandemic and managed to negotiate the new trading rules caused by Brexit should give themselves a pat on the back as we head into a new year of unknowns. These challenges have caused staff shortages, and product delays - all creating the perfect storm for global supply chain chaos.

What many business leaders will have learned as they’ve navigated these events is the importance of building contingency and resilience into their supply chains to mitigate against unforeseen disruption to usual operations.

As supply chains become increasingly complex and global, potential failure points and higher levels of risk grow exponentially. Supplier risk mitigation strategies shouldn’t be relegated to the bottom of the ‘to do’ list, now is the time to prioritize them and ensure that key relationships are as strong as they can be. Here are five considerations for bolstering these relationships, adding diversity into the supply chain, and mitigating against potential future risks:

1. Keep lines of communication open

Keeping in regular contact with key suppliers is vital if businesses want their support during a turbulent period. Equally, if the vendor is experiencing difficulties, they should feel that that they can speak openly and honestly about their issues. Keeping each other up to date about any issues they are facing means both parties can work together to find a solution before any problems escalate.

2. Have a plan B

Building resilience into the supply chain is a necessity, but it’s not always as easy as just finding a new provider at short notice. For example, a manufacturing business may collaborate with many different vendors but at a product level, contingency of supply can be limited, especially if technical product approval is required on an ingredient that’s being added to a beauty product or drink. Some products will need to meet strict regulations or be vigorously evaluated and validated and this is a rigorous process that can’t be rushed. Businesses need a plan in place to manage this if there’s an issue, so a plan B, and sometimes even a plan C should be in place.

3. Costs and payments

Procurement is hard-wired to question whether they’re paying their vendors the best possible price. With cost inflation still an issue, purchasing professionals might need to consider going a little easier on their suppliers right now. Aggressive cost negotiation and tough T’s&Cs can cause difficulties for vendors. Equally, ensuring they are paid on time, every time will help their cash flow and may encourage them to do their customers a favor if they find themselves in difficulties. Instead of trying to get products at rock bottom price, businesses should instead consider what alternative deals could be done with their vendors such as, increased credit terms or bulk discounts.

4. Alternative supply sources

If sourcing new suppliers is proving tricky, businesses should consider adding more diversity into their supply chains. Perhaps it’s time to review and monitor all existing agreements, and if one vendor dominates, look at what alternatives could be introduced. Also check sourcing criteria to ensure there are no non-essential obstacles in the way preventing attracting new alternative sources of supply.

5. Embrace technology

Maintaining strong relationships with key providers is a challenge but technology and automation is here to help – contract management software can enable procurement to access agreements quickly, while eSourcing tools can help with vendor selection. Supplier information management tools can also be used to speed up the onboarding process and help boost relationships.

Like any good relationships, organizations need to invest in them. Suppliers shouldn’t just be left to get on with it and checked in on a couple of times a year. Prioritizing these valuable partnerships can help organizations mitigate against risk when they need it most.