Supplier relationships, and the management of those relationships, can become a deciding factor in the top-line quality, performance and profitability of an organisation.
However, selecting the right suppliers is no easy task. Adding to the complexity, is that once an organisation selects the ‘right supplier’ there is no guarantee that the buyer-supplier collaboration will be a relationship of trust, transparency and/or longevity.
In this scenario the purchasing entity must play a forced hand; either drop the supplier and pay the costs of changing; or spend resources to develop the supplier relationship.
“To their detriment, some companies never look for new suppliers, whilst others change their suppliers far too often.” Sounds like a Catch 22?
There are numerous factors that go into the decision to select a supplier, as well as the decision to change supplier. Supplier selection is relative to the purchasing body and an organisation wants and needs; whether it is a new collaboration, the choice to extend a supplier relationship, or the decision to change a supplier.
Whichever way you decide to go, a defective supplier relationship can be the leaky hole in the bottom of your business’ bucket.
Let us help you start addressing the costs of poor supplier relationships; and stop wasting time and money on uncommunicative suppliers.
Businesses estimate they spend on average around 55 hours per week doing manual, paper-based processing, and checks; 39 hours chasing invoice exceptions, discrepancies and errors, and 23 hours responding to supplier enquiries.
This loss over time equates to around 6500 hours during the work year, that businesses are throwing away by processing papers, fixing purchase orders, and replying to suppliers. These numbers appertain to the average business. Just imagine the money and time lost when adding a bad supplier relationship into the mix!
These statistics were originally published by Tungsten Network to illustrate the ineffective actions in traditional supplier relationship management. Underlining that the adoption and integration of outsourced specialist solutions could create more effective supplier relationship management. However, no solution in the world can help enhance the value of buyer-supplier collaboration if the supplier party isn’t upholding their end of the relationship.
- Infrequent or ineffective levels of communication can become detrimental for a supplier relationship.
- There is a volatility imbedded in uncommunicative relationships that breeds uncertainty.
- Don’t waste your time, money and energy on uncommunicative supplier relationships.
Appointing the right Supplier for your requirements
When you as a procurement, category or sourcing manager find yourself stuck in a bad supplier relationship you may have a desperate desire to drop them like a hot potato – please don’t do this until you speak to an expert adviser.
Work with ThirstLink to evaluate the complexities involved with the existing supplier agreement and evaluate the costs of switching suppliers. Above all, assess the requirements and limitation of your buyer-supplier contract.
If you have been with your current supplier for some time, the odds are they are very familiar with your needs and the type of business you’re running. If you have experienced few issues during your contracted partnership, you may want to reconsider making a change, especially if the financial savings will be minimal. In cases like these, trying to renegotiate your current contract and service levels may be a way to both save money as well as maintain the status quo.
Renegotiation can be complex, however, there is always opportunity that you could continue collaboration and renegotiate a larger cost savings opportunity, together with a vastly improved service for your organisation instead of changing suppliers. However, if you’ve made up your mind, don’t let the above information deter you. Some pain points in buyer-supplier relationships escalate beyond a renegotiation of a contract and are better handled with a clean break.
Devaluation of Brand Image
Supplier relationship management can prove crucial to the top-line success of a brand’s image and profitability. The actions of sub-standard suppliers will almost certainly fall on the shoulders of your brand. Brand association is one of the most volatile elements of selecting a new supplier as is continuing to accept the poor performance of an existing supplier.
In our media heavy world, news spreads fast and the visibility of brands is at an all-time high. Averting risks requires initiative to get in front of the possibility for risk. In the case of supplier relationship management, this requires hands-on governance and compliance parameters to be placed upon suppliers, both during prospecting and on-going during collaboration.
When choosing a supplier, you must consider their ‘non-price benefits’. These are the elements of a supplier’s organisation and activities that cannot be equated to initial monetary gain or profitability, but rather are elements such as quality, sustainability, competitiveness, and overall stability.
For expert support in reviewing and managing your organisations Vending, Catering, POU Water and Consumables Supply Chain talk to an expert refreshment’s adviser from Thirst Link Consulting.
