Supplier Relations

Supplier Relations

 

Key strategic decisions in supply management center on which supplier to pursue and what kinds of relations to maintain with suppliers.  Strategic supply management is founded on the conviction that a significant competitive edge can be gained from the suppliers an organization has developed and its supply systems and supplier relations.  The prime objective in supply relations is to develop a supply link that will provide a short and long term strategic competitive advantage.

 

  • Supplier Relations Context – The trend toward fewer suppliers, long –term contracts, e-procurement, and continuing improvement in quality, delivery, price and service requires much closer coordination and communication between various people in both the buying and selling organizations.  Improving buyer-seller relationship is of utmost concern.  Outstanding supplier performance normally requires extensive communication and cooperation between various representatives of the buying organization and the selling organization over a long period of time.  Progressive supply organizations are pursuing ways and means of limiting their total number of suppliers and maximizing the results from fewer key suppliers.
  • Supplier Goodwill – Organizations develop consistency in performance and quality, and this repeat performance can be looked upon as an important asset for an organization.  It is sound marketing policy to develop goodwill between the buyer and the seller.  This “goodwill” has been cultivated through the development of trademarks and brands, through extensive advertising, through missionary effort and the like.  Good will between a purchasing organization and its suppliers needs to be done and cultivated just like in the marketing space.  Since strategic plans are so often based on the assumption that supply sources will be cooperative, it makes sense to ensure that the goodwill (performance) will be forthcoming.
  • The Purchaser-Supplier Satisfaction Matrix – The Purchaser-Supplier Matrix is designed to “map” relationships with suppliers based upon set criteria in order to decide the basis on the relationship.  There are differing levels on satisfaction and dissatisfaction, and the key is to use the criteria to delineate satisfactory performance from the buyer and supplier perspectives.  After the performance is mapped, the buyer and supplier have to come with action plans and solutions to correct the issues.
    • Tools and Techniques for Moving Positions – buyers and suppliers can use negative or “crunch” methods to move each other along the satisfaction continuum, or positive or “stroking” methods to improve satisfaction mapping.  The perception of a relationship is based upon both the results obtained and the process by which they have been achieved.  For example, crunch methods pleasantly applied may be far more palatable than the same tool used in a hard-nosed way. 
  • Supplier Relationship Management – The Purchaser-Supplier Satisfaction Matrix underlines the need for extensive communications between both parties in the buying-selling relationship.  The whole art of supplier relationship management from a supply perspective is to bring both sides into an effective working relationship.  This will require substantial coordination work inside the buyer’s organization to ensure that the people most vitally concerned with a supplier’s performance are fully involved in the planning and execution of a program leading to the desired long-term relationship.  Without internal cooperation and a congruent strategic internal approach to the improvement of supplier relations, supplier relationship management is impossible.  Moreover, the ability to develop effective working relationships with suppliers will depend on supply’s ability to develop effective internal working relationships.  Thus, supply’s status within the organization and the availability of qualified and credible supply personnel will be key determinants of the organization’s ability to get the most out of its supplier force.