Close, long-term relationships with your suppliers can be good for everyone concerned. Your company can’t succeed without the support of the vendors and suppliers who provide you with the goods, services, and materials you need to operate. In today’s business world, procurement is a key part of any sound business strategy.
And it’s not that hard to understand why. Working with the same suppliers and vendors over the long term allows you to realize cost savings, work more efficiently together, and mitigate supply chain risks, compliance risks, and other risks that come with bringing a supplier or vendor into your business strategy.
You can collaborate with your vendors and suppliers to drive innovation and conquer the market, and enjoy increasing returns on your investment of time and trust into a supplier relationship.
1- Lower Costs
When you’re running a business, you need to operate on as thin of a margin as you can. Most businesses won’t succeed, and a big part of the reason why they fail is because staying in business is expensive, and it’s all too easy to find your ledgers consistently in the red.
You simply can’t afford to waste money when it comes to buying the services, supplies, equipment, and materials you need to run your business.
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Developing strong relationships with your most important suppliers can allow you to identify and cut loose any suppliers who aren’t performing as well as you need them to, so you can focus on working with your highest-quality, top-performing suppliers.
Because forging long-term contractual relationships with customers is good for vendors’ business, suppliers with whom you have a strong relationship will be motivated to offer you better deals, including discounts and incentives that could save you money.
Transparency and honesty in your supplier relationships will open up avenues for tweaking procedures and processes to make them more cost-effective, too.
2- Increase Efficiency
A strong vendor management procedure can really cut down on operational inefficiencies — like duplicate paperwork, loss of vendor information, or misplaced contracts — that can cost you a lot of money in additional administrative costs.
A strong vendor relationship requires strong vendor relationship management, so your supplier relationship management procedures should include processes for centralizing vendor data, assigning dedicated employees to work with specific vendors and manage those relationships, and keep records appropriately.
All of this can reduce inefficiencies, which will further improve your supplier relationships and can also keep operating costs under control.
3- Reduce Risks
Working with third-party suppliers and vendors is always risky. Suppliers and vendors may have access to sensitive data about your business and its customers, proprietary processes, and intellectual property. You run the risk of reputational damage, compliance failures, supply chain failures, and more if your suppliers let you down, and it’s largely your responsibility to deal with those failures when they occur.
But, as they say, you will gain little if you never take any risks. Fostering a strong relationship with your suppliers and vendors can help you mitigate the risks associated with vendor and supplier relationships. You can use a supply chain risk management tool, like the one available at https://www.coupa.com/products/supplier-management/risk-management/, to understand your supplier risk levels and mitigate them.
4- Enjoy Opportunities for Collaboration
You already collaborate with suppliers to bring your business the materials, goods, and services it needs to succeed. With strong supplier relationships, you can establish realistic thresholds for your suppliers to meet so that you can optimize your relationship. But suppliers and vendors might have requirements of their own. A strong relationship fosters the type of communication you need to really drive innovation in your relationship with your vendors, and develop new products, start new projects, or improve the way you do business, with one another and the world.
5- Improve Compliance
Are your vendors compliant with regulations governing your industry? Do they follow the ethical standards set by professionals in your field? What about other ethical standards, like a commitment to social responsibility or environmental sustainability?
A strong relationship with your suppliers gives you the kind of intimate look into their business operations and philosophy that you need to know your vendors are professional, responsible, and legally and ethically compliant with industry standards. You can make sure that their culture and values match your company’s own, so you won’t risk your reputation or disillusion your customer base.
The Bottom Line
Suppliers are the lifeblood of your business, and that’s why it’s always worth working to establish, and maintain, strong vendor relationships. As you and your suppliers grow together over the years, you’ll find more and more ways to work together, and you’ll all thrive as a result.