Your suppliers can be strategic partners giving you that edge over your competitors, or they can hold your business hostage. Fortunately, you have a significant control over how your supplier relationships develop.
1. Vet your suppliers the way you vet your employees
You don’t hire just anyone off the street. Any given supplier has far more potential to impact your business than a single employee. Why wouldn’t you go through as precise a process to select and contract with a supplier as you do when hiring an employee?
Clearly define the skills and responsibilities you need from the supplier. Specify expectations and success metrics that you need them to meet so you can make an informed determination if a candidate supplier is suitable. Last, make sure they’re a good culture and values fit to work with your team. If you start things off right, you’re on much stronger ground to build from there.
2. Get the basics right
You want to grow your supplier relationship to a place of mutual trust and loyalty, where you can benefit from some flexibility, advantageous terms, and priority attention. You can’t go next-level if you’re not fulfilling basic expectations. That means:
- Pay on time
- Be accurate with your forecasts
- Provide adequate lead times
- Provide all the information the supplier needs to fulfill an order in the form and format the supplier needs it
It also means that your team lives up to all its contractual obligations. Speaking of which…
3. Have a service level agreement (SLA)
Your service level agreement defines all the key metrics and commitments on both parties in advance so everyone has clear, mutual expectations for what they need to deliver and what they can expect from the relationship.
The SLA doesn’t just set out demand and delivery metrics, but communication expectations and processes as well. It provides the agreed-upon processes for exception handling and the other predictable challenges that will inevitably come up. The SLA’s value isn’t just about setting performance expectations. It’s also the framework that helps you and suppliers navigate issues in constructive ways.
4. Be a transparent, active communicator
Clarifying your general communication channels and timelines will be part of the SLA. When defining the communication procedures in the SLA, clarify standard reporting and escalation procedures, and what communication channels should be used under different scenarios.
Use technology to supply information easily and accurately. Shared access to a cloud-based system provides transparency that empowers both parties to check up on data without having to contact a person on the other side, making communication more efficient, and leaving less room for miscommunications. Automated business rules and notifications can let everyone know when tasks are done or something’s gone awry. It also can be a repository of shared materials, messenger chats, and other documentation important to the relationship.
And do be transparent. Transparency and communication are critical to moving your relationships past the formal, arms-length stage to where you can really be of strategic use to each other. Being transparent includes talking about upcoming changes in the business, such as new products, serious deviation from typical volume demand, or changes in key personnel.
5. Cultivate some mutual understanding
Approach the relationship as a partnership. Not as a customer who’s always right. Take time to learn about the supplier’s business. They have suppliers too, as well as other customers. Understand what levers impact their business and ability to serve you.
Be proactive about learning what they need or want from you to make things go more smoothly. Find ways to be flexible and look for mutual benefit. This doesn’t mean you shouldn’t have high expectations. You should. You can be a demanding partner while doing it in a way that makes you a valued and trusted partner.
When things do go wrong (and something will go wrong), don’t ruin the relationship by going on full attack. Fall back on the internal dispute resolution process you’ve set out in the SLA or contract. Don’t focus on blame and accusations, but solutions and future prevention. Approach it with the position that you want this relationship to come out of a snafu or dispute stronger than it was going into it.
The Golden Rule works well here: treat your suppliers as you would have them treat you. Show loyalty and understanding to them if you want them to show the same to you.
6. Make it personal
People prefer working with people. Not email inboxes or text messages. They like even more working with people they like. Have people at all the points of contact between your business and a supplier make direct, personal contact. When you get a chance to have an in-person meeting take it. If that can’t happen often, make the weekly check-in call a video chat or conference.
Take time to get to know your supplier contacts as people. If you don’t know anything personal about a supplier a year into the relationship, you’re doing it wrong. Building a strong personal relationship will go a long way to shoring your professional one.
Strong supplier relationships are core to your business success
The potential benefits to forging strong supplier relationships are clear. Their reliability, cost efficiency and flexibility can translate into a competitive advantage for your business. A supplier that trusts you and values its relationship with you can be a source of financing or preferential payment terms, easing the cash flow challenge of buying inventory. They can be a prime source for customer referrals (let that go both ways).
Don’t just think about what you need to protect by keeping quality supplier relationships, think about all you can gain from truly collaborative ones.