Meaning and Benefits of Supplier Relationship Management

The benefits of supplier relationship management are priceless. But supplier relationship management can get tiresome when you don’t see results immediately. 

What are the Benefits of Supplier Relationship Management?

Some benefits of supplier relationship management are:

Reduced costs

You can enjoy savings in the form of lower delivery or procurement costs once you establish a great relationship with your suppliers. If you’re good at managing your relationships with the businesses that provide your supplies, you’ll get preferential treatment as a customer. 

A consistent, reliable delivery schedule for your products can prevent your procurement schedule from being delayed and the additional costs that would otherwise result. 

Enhanced productivity

You can expect your supplier to gain a deeper understanding of your company and its needs as your relationship grows stronger over time. Every link in the supply chain must function smoothly for the benefit of all parties; better two-way communication and mutual comprehension do just that. As a bonus, it ensures that problems will be resolved efficiently and rapidly.

Reduced risks of price fluctuations

Every purchasing department worries about market fluctuations. Reviewing the length of a contract, the number of goods stated, and weighing the significance of the goods against price volatility requires careful thought and time. 

All parties, however, can benefit from an open book policy and the negotiation of margins rather than the use of fixed contract pricing in the event of fluctuations or uncertainty. Trust, acquired by maintaining a good relationship with a supplier over time, is essential to achieving this mode of operation.

Simplifying your procurement process

One of the benefits of supplier management is a strong rapport with your suppliers, you might be able to streamline your entire purchasing process with their help. With a deeper understanding of your needs and preferences, your suppliers will be better able to manufacture or source the additional goods you require, streamlining your procurement process and making financial planning uncomplicated.

Product and process improvement

Once you’ve established trust with your suppliers, open lines of communication can improve your procurement strategy, supply chain, and the quality of the goods you buy. You and your suppliers may reap monetary and operational benefits from all of this over time.

supplier relationship management

An organisation’s suppliers come in many shapes and sizes if we consider the types of suppliers from material providers, consultants, contractors and subcontractors, training providers, and asset maintenance providers.

Each supplier type has different requirements. For example, if you are using contractors, you will want to ensure they have appropriate training, licences, and insurance. The requirements for your asset maintenance providers may include checking they have a vehicle repairers licence. Another example might be a PPE provider. You want to ensure they deliver effective protective equipment.

With a growing business, supplier assessment is essential in determining the likelihood of your suppliers meeting your requirements. It is crucial to evaluate how well your supplier is meeting time, quality, and quantity metrics and how these bring value to your organization.

Consider the impact of a poorly performing supplier and their potential impact on your reputation, the possible effects on safety for your business, e.g. a supplier providing scaffolding not correctly installed. These issues can lead to the following:

  • Scraps and waste
  • Additional expenses from rework or rectification
  • Need for conducting failure analysis
  • Repairs and servicing
  • Warranty claims
  • Complaints and damage to brand reputation
  • Returns

How can supplier management be improved?

Several methods exist for keeping an eye on and improving supply chain quality

Measure the cost of quality

The expenses associated with low quality should also be factored in, including those associated with scrap, rework, sorting and processing, warranties and recalls.

Implement a cost-recovery process

The cost recovery system improves accountability. You may be able to get your money back if the quality is low. And the supplier will likely appreciate the chance to investigate and resolve the root causes of the problem more quickly.

Conduct supplier audit

Settle a procedure to check for manufacturing, quality, service provision, and compliance non-conformances. Audits can help you pinpoint problem areas and come to terms with how to address them, as well as set goals for resolving them and minimising their occurrence in the future.

Rate suppliers based on their performance

Compare them to one another with the help of standardised supplier scorecards. Supplier scorecards can track KPIs, non-conformance, and risks. They can help you monitor the success or failure of quality initiatives over time, pinpoint problem areas, and settle on corrective measures to lessen future quality risks.

Integrate IT solutions

The supply chain, from procurement to delivery, can benefit from a unified IT infrastructure, eliminating the need for multiple, disconnected systems.

ISO 9001 Quality Management System demands you to consider the type and extent of control over suppliers considering your organisation’s goals around providing consistent, high-quality products and services.

FocusIMS gets your suppliers onboarded with all the requirements and manages requirements ongoing for items such as insurance certificates of currency and review dates on Safe Work Method Statements.

FocusIMS software is a real-time solution for managing supplier requirements and minimising the risk of less-than-optimal performance.

Importantly, it helps you obtain and maintain your ISO certification, a clear statement to customers that they can trust your brand and your products.

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