Why Procurement Supplier Relationship Management is Important
Originally published on June 12, 2020
Establishing and maintaining a good relationship with suppliers can improve the financial health of your business and help you build a network of connections that underpin the business and its success. To develop a good relationship with a supplier, you need to invest time into the relationship, nurturing it from the very first conversation. Sometimes, procurement supplier relationship management can feel tiring as an immediate reward isn’t guaranteed. However, the benefits that can come from a good supplier relationship make all the time and energy you put into it worth it in the long run.
Benefits of a Good Supplier Relationship
All of the advantages discussed below can be gained, in time, from maintaining a great working relationship with suppliers:
1. Cost reductions
Once you have gained your suppliers’ trust by building a relationship with them over time, cost savings (in the form of reduced delivery costs or procurement costs) could be yours. Strong procurement supplier relationship management will mean you receive the best service from your suppliers as you are a favoured consumer. Even if it’s not a physical saving, consistently reliable delivery times on your products prevents your procurement timeline from being delayed and extra costs incurred as a result. Find out more about cutting procurement costs in our dedicated blog post.
2. Increased efficiency
As your relationship with your supplier positively develops over time, they will naturally gain more insight into your company and therefore more understanding of the business as a whole. The supply chain needs to run like clockwork for both parties involved, and with increased communication and understanding, the flow of operations only becomes more efficient. Also, it means that should any errors occur; they will be handled quickly and effectively.
3. Lower risk of price volatility
Market fluctuation is something every procurement team is concerned with. Having to review a contract’s length, the volume of goods stated as well as evaluating the goods’ significance against the price volatility, takes careful consideration and time. However, by having an open book policy and negotiating margins rather than fixed contract pricing, all parties can benefit when any fluctuations or uncertainty occurs. This way of working can only be achieved through trust, gained by maintaining a good relationship with a supplier over a period of time.
4. Streamlining your purchasing process
As time goes on, your solid working relationship with a supplier could help you to streamline your overall procurement strategy. As both parties get to know each other, suppliers can better accommodate a consumer by manufacturing or sourcing other items they need to procure, enabling you to streamline your purchasing process and making budgeting much easier for you. For example, Fuelmate could help you to streamline your purchasing process as it provides a range of fuel card packages designed to offer comprehensive and consistent savings when compared to national average retail prices.
5. Opportunity to outsource tasks
Efficiency within your own department by reducing workload could be achieved by outsourcing some minor activities to suppliers, after establishing mutual trust. Things such as inventory levels, or admin tasks could be carried out by the supplier as part of the supply chain process, meaning that your team has more time to focus on other procurement tasks.
6. Product and process improvement
Once a solid foundation and relationship are developed with your suppliers, constructive communication can be free-flowing and lead to a positive impact on the procurement process, the supply chain and the actual quality of the procured items themselves. All of this can trigger various financial and operational advantages for both you and your suppliers over a period of time.
Creating a more streamlined, efficient supply chain and procurement process can be achieved through effective communication, created by developing a good relationship with your supplier. To find out more about the steps you can take to ensure good procurement supplier relationship management, please check out our step by step guide to successful fleet procurement for some expert tips.