One method Procurement leaders are using to prepare their teams for an effective 2020 and beyond is fostering and managing solid supplier relationships that can help mitigate risk and prepare your organization for potential disruptions.
Quality supplier relationships are integral to the health and well-being of almost every organization. While some suppliers are absolutely integral to smooth and efficient operations (think Foxconn to Apple), others have a lot less effect on the bottom line (think Apple’s janitorial supplier).
While improving all supplier relationships is likely to prove advantageous in different ways, it makes the most sense to begin by targeting those suppliers most intimately connected to your organization’s profitability.
Reactive vs Strategic Approach to Supplier Relationship Management
Most procurement leaders tend to take one of two approaches to their supplier relationships: the reactive approach or the strategic approach.
A reactive approach to supplier relationship management (SRM) is basically an “ignore-it-until-there’s-a-problem” approach. That is, teams are not proactively working on the relationships. If and when issues arise, reactive leaders attempt to make adjustments in the moment and hope they’ve pursued the best course of action.
Leaders using the strategic approach think about supplier relationships somewhat differently. They don’t wait for issues to arise. They’re proactive. They and their teams have already assessed these relationships in advance. They know the major risks and weaknesses. They’re aware of the impact any sudden changes can have on their organization’s operations and profitability. And – most importantly – they have a predetermined plan for how they’ll handle any changes or disruptions.
Supplier Relationship Management in 2020
SRM is no longer about relentless attempts at cost-cutting or trying to gain an upper hand on your suppliers—
Strategic leaders are looking at third-party relationships as opportunities to create win-win scenarios that foster productive and profitable long-term partnerships. But they are also considering what level of exposure to various risks suppliers bring to the organization – and how best that risk can be mitigated should it manifest. They use their deep understanding of their supplier relationships to effectively and efficiently distribute limited internal resources.
4 Tips to Rock-Solid Supplier Relationships
Here are 4 simple tips to help you and your team build stronger, more efficient, and more productive supplier relationships – and mitigate any potential supplier risks…
#1 – Know Your Suppliers
Know which suppliers are and are not integral to your supply chain, operations, and profitability. Are they a solid, reliable, and effective partner? Have you made the necessary efforts to understand their business, their cycles, and their relative financial strength?
#2 – Understand Supplier Risks
It isn’t necessarily a bad thing to be tightly connected with a supplier so long as you have the necessary information to assess any potential risks they may pose to your organization. The key is to have mapped your priority suppliers and to clearly identify and prepare for the most probable risks.
#3 – Use Technology to Automate & Simplify
Advanced machine learning, artificial intelligence, and Best-of-Breed procurement technology solutions allow CPOs and their teams to eliminate time spent on repetitive data retrieval and analysis tasks – effectively automating and simplifying many processes while also learning from data and highlighting points of interest (such as specific supplier relationships) that could use the benefit of additional scrutiny.
#4 – Be Proactive & Use “The Human Touch”
Using automation and AI technology frees you and your team to be more proactive in your approach. Instead of being chained to computer screens, teams can reintroduce the powerful effect of “the human touch” to your supplier relationship management plan.
Suplari Can Help You Understand Supplier Risks
Suplari is an AI-driven spend management platform for procurement and finance teams that leverages all your organization’s data to provide advanced analytics, supplier and supply-chain intelligence, and risk & compliance analysis – highlighting important opportunities and risks evidenced in your data.
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