Strategic relationships and partnerships are critical to every organisation and can deliver incredible results – superior operational performance, supply chain assurance, innovation, faster time to market, product quality and improved financial performance. But every relationship requires effort, and it’s easy to lose sight of the multiple elements that must combine in order to drive success. Over time many relationships end up with both parties frustrated – and that translates into inefficiencies, lost value, and in some cases dispute, conflict and exit.
We may live in the age of technology, but what is still true is that success in business is defined by human relationships. We all know the importance of managing and nurturing customer relationships to maximise income. However, supplier relationships are just as important and yet are more likely to get overlooked.
As with so much of procurement, supplier management is about people management: it’s important to never underestimate the importance of the human aspect of business and its impact on success. Strong, healthy strategic relationships with suppliers and partners can mean better value for your business, as well as increased cost effectiveness and productivity.
How to form stronger supplier relations
In order to build strong relationships with suppliers and partners, we must think about procurement as more than just purchase agreements and contracts. Instead, the emphasis should be on human interaction and the added value that human aspects can bring to operations.
The bedrock of strong relationships is communication. As a society, we’re losing the skill of speaking face to face, or even on the phone. But talking to your suppliers is the best way to get to know them, learn about them, and build mutually beneficial agreements. Be honest and open with each other in all communications: sharing information and being transparent about intentions and goals increases the likelihood of reaching agreements which benefit everyone.
Trust is also one of the most important factors in building strong partnerships. Suppliers and buyers who trust each other will work together to solve problems and keep operations running smoothly. In order to build trust, there has to be respect between parties: a mutual appreciation and willingness to consider the needs and opinions of the other party.
You should also be fair. If one party feels that they are not getting treated fairly in the partnership, the relationship will break down. Similarly, try to be as flexible as possible in order to accommodate your partners where possible. Strong relationships usually take willingness on the part of both parties to listen, adapt, and accommodate.
The Benefits of Strategic Supplier Relationship Management
With the impact of COVID on travel and worldwide supply networks, supplier relationship management is now even more vital than ever. Organisations which prioritised strategic sourcing and strategic supplier relationship management during the pandemic period fared substantially better during this tumultuous time, which illustrates how important good supplier management is to business success.
By prioritising strategic supplier relationship management, you are likely see many benefits, such as:
1. Improved quality of goods and services
2. Reduced costs
3. Improved supplier performance
4. Greater transparency and visibility
5. Improved communication and collaboration
6. Greater innovation
7. Increased customer satisfaction
8. Improved risk management
9. Greater agility
10. Improved business continuity
How to choose the right supplier
We may recognise the benefits of strong strategic relationships, but how do we go about finding the right suppliers and partnerships?
Businesses often choose suppliers based predominantly on cost, and may change suppliers regularly in order to get what they see as the best price for the product or service. However, whilst there may be short-term financial gains to this approach, it rarely turns out to be the most efficient method, since searching for and arranging contracts with new suppliers incurs further costs. Plus, this method can lead to more serious long-term costs from reputational damage due to poor quality control and order fulfilment, which may well wipe out any initial price-based saving.
Instead, organisations should aim to form long-term, stronger bonds with suppliers and partners. This strategic approach offers better value than regularly switching contracts. As well as value for money, look for quality and reliability in your suppliers, as well as excellent levels of service and communication. Your culture and behaviours should align, and there should be a relationship of trust and openness, shared vision and objectives, and corresponding ways of working.
How Accelerate can help: Strategic Relationship Diagnostic
Even with the best of intentions it can be difficult to prioritise the time and build the capabilities required to form strong strategic relationships. Accelerate can help with a simple but holistic approach, grounded in operational reality and delivered by procurement professionals who have lived and breathed these key relationships (from both sides) over many years. We work jointly with the customer and supplier/service provider, through a combination of interviews, workshops and an online diagnostic tool, to develop a tailor-made roadmap for improvement and evolution.
Supplier relationship management is about defining, measuring, and improving supplier performance and is vital to organisational success. By understanding supplier performance, an organisation can determine which suppliers provide the best value and products and which ones require improvement. Many organisations see the benefits of forming strong partnerships, but struggle to identify what needs to be remediated and improved upon – what are the areas of focus and how do you create a jointly agreed roadmap to improvement based on a defined set of data points?
Accelerate’s proprietary diagnostic approach is designed to independently and objectively assess the health of a strategic relationship, and define a jointly agreed target state for the relationship that will deliver the required outcomes. We will also identify practical and effective improvements to deliver those target outcomes, as well as a delivery framework to get there.
At the heart of our strategic relationship diagnostic are the four integrated foundations that we believe are fundamental to the success of any strategic partnership:
- Operational: Optimised delivery performance and driving transformation
- Commercial: Financial Growth and Shareholder Value
- Culture & Behaviours: One team – transparent and accountable
- Capabilities: Develop, maintain, and retain the required capabilities
For a customer/client, these four integrated foundations will help achieve aligned objectives and renewed executive commitment, delivery of business outcomes, service performance improvements and a more effective and transparent operating model and governance. Customers/clients will also benefit from faster decision making and greater agility to adapt to changes, and build/improve internal service management capability. They will also be able to create a clear baseline, align on target state, and develop improvement roadmaps.
For suppliers and service providers, our strategic relationship diagnostic will result in a proactive and committed approach to customers/clients, the ability to properly prioritise investment, and to secure, optimise and grow current strategic relationships. Suppliers will also be able to better align financials with Client/Customer, and benchmark and build consistency and rigour across strategic accounts. Our four key foundations also aim to help suppliers to develop and improve core competencies across their account teams, create a clear baseline, align on target state and develop improvement roadmaps.
If you are keen to improve the strategic relationships and partnerships within your organisation and feel that our Strategic Relationship Diagnostic could help your business realise it’s full potential, contact Accelerate today for a chat.