Maintaining solid supplier relationships is crucial to your business’s continued success. In this article, we’re going to go into more depth regarding supplier relationship management, and how hiring a sourcing agent to assist you with these requirements can be of great benefit to your business. Here’s everything you need to know…
What is supplier relationship management?
Supplier relationship management (SRM) is the process of evaluating and then managing the relationships between your buyers and suppliers within the supply chain. It involves regularly reviewing your supplier key performance indicators (KPI’s), allowing your supplier to present you with various challenges that need to be addressed, and indeed opportunities that can benefit both parties.
SRM shouldn’t be confused with supplier management. Supplier management is defined by reactively managing a supplier (e.g., due to poor performance). Supplier relationship management on the other hand, is more focused on how the supply chain is performing and ensuring that the suppliers that you are working with are reliable and will continue to provide you with an exceptional service at all times.
Here are some of the outcomes that you can expect from proper supplier relationship management:
- Better trust: Better trust results in fewer conflicts and a better customer service all-round
- Improved communication: Improved communication allows you to resolve issues faster and ultimately improves the buyer/supplier understanding. This invariably reduces your operational costs, both for you and the supplier
- Free-flow of innovation: When you can share ideas more readily it results in greater innovations, bolstered operational efficiency, and high-quality ideas that can benefit both parties.
What are the benefits of proper supplier relationship management?
What are the benefits of proper supplier relationship management? Why is it so important? Here are five ways in which supplier relationship management—when handled well—can improve your business:
1. Improved cost management
One of the greatest advantages of good supplier relationship management is improved cost management and a reduction in overheads. When you are able to analyse the data in your supply chain, you can proactively address the costs involved with the following:
- Minimise the costs involved with competing, negotiating, and settling a new contract
- Evaluating your supply chain for any price discrepancies
- Creating better vendor / product rationalisation
- Identifying any potential logistical savings in the supply chain
2. Streamline your operational efficiency
Another benefit of proper SRM is having increased efficiency across the board. When you review your suppliers regularly, it can lead to a far better understanding of your supply chain. This allows you to consolidate items, reduce the number of vendors you are working with, and continue to create mutually-beneficial partnerships with your suppliers, ultimately reducing the amount of time and effort required to manage your supply chain.
Naturally, as your business begins to grow, so too does the complexity of your supply chain. If left unchecked this can result in your business ending up with too many vendors for you to manage effectively. With proper supplier relationship management in place, you will have the opportunity to engage with your vendors more effectively and determine whether they are still able to add value to your business.
3. Better supply chain consolidation
Supplier relationship management also allows for better supply chain consolidation. This will reduce price volatility and enable you to create a far more efficient supply chain.
When you are regularly reviewing your supplier relationships, you’ll be in a better position to share your business objectives with them, allowing them to properly plan for the future in order to facilitate your growth. SRM encourages both you and your supplier to work together more collaboratively in order to maintain the best possible deal—which suits you both—for as long as possible.
4. Solid supplier relationships
In addition to that, quality supplier relationship management leads to improved relationships with your suppliers. One of the most crucial (and often overlooked) functions of SRM is understanding cultural norms – something to bear in mind when sourcing from overseas.
For example, at UCT (Asia), we can help you navigate the Asian market with a thorough understanding of how various Asian cultures conduct business. With a better understanding of their values, it produces more trust and greater mutual respect – thus leading to better and longer lasting relationships.
Not only that, but better relationships lead to more reliable business practices. You must create space for regular and meaningful communication about the way both parties are performing in order to promote a culture of innovation and collaboration.
When you understand your supplier through and through (and vice versa) your mutual success is far more likely assured.
5. Increase your potential to outsource business requirements
And finally, another huge advantage of SRM is having the potential to outsource even more of your business requirements. As you continue to foster healthy and long-lasting relationships with your suppliers, there are more opportunities to transfer various activities. For example: a trusted supplier may be willing to hold additional inventory for you at no extra charge, thus enabling you to reduce the overall cost of your logistics and warehousing requirements.
Of course, this isn’t always going to be the case. However, when you invest more time and effort into your supplier relationships, you’d be surprised by the generous and amazing ways in which they might accommodate you.
How can hiring a sourcing agent help?
Of course, there is plenty of information available on how to foster solid relationships with your suppliers, however, it’s a question of time. Running a business is a complicated job that comes with all manner of responsibilities. As such you should think of hiring a sourcing agent to help you with your supplier relationship management in the same way as you’d hire an accountant to take care of the books. This can free you up with more time to focus on other aspects of your business, whilst leaving the supplier relationship management requirements to dedicated professionals like UCT (Asia). That, and partnering with a sourcing agent who is well-established overseas (e.g., Asia) can be beneficial when it comes to navigating cultural norms and business etiquette.
Need assistance with managing your supplier relationships?
We hope that this article has been helpful to you. If you find yourself feeling overwhelmed by it all and would like to outsource these requirements to an established and reputable third-party sourcing agency like UCT (Asia), then please do not hesitate to contact us today. One of our friendly and knowledgeable representatives will answer any questions that you might have and assist you with moving forward.