Did you know that almost 60% of businesses believe that a healthy supply chain gives them a competitive edge over their rivals?
In the economically turbulent world of 2021, businesses need every advantage that they can get to stay afloat and thrive.
Supply chains are complex structures made up of many smaller elements and enterprises. Your relationship with each of these elements is crucial to the overall success of your supply chain arrangements.
How can you practice good supplier management? What are businesses doing to improve? Why not read on to find out.
- Increased Efficiency
A healthy supply chain benefits every element in the chain. It is therefore mutually beneficial to build a system that is profitable and efficient.
However, as your business grows it will have an expanding number of retailers, distributors, and possibly even manufacturers. It is difficult to ensure that the supply chain is profitable for all and then your relationship with each is healthy.
This is where supply chain management software and methodology come to the stage. An individual or Excel spreadsheet can maintain information about some supply chain elements. However, professional software can help you to manage a huge amount of complex relationships.
It will provide receive real-time data regarding the performance and value of each vendor. You can also ensure that you are contributing to the efficiency of the supply chain.
SCM software can give you a more accurate view of your business and the impact of other elements of your supply chain.
- Better Cost Management
As you practice management of your vendor relationships, you will gain valuable insights into the hidden costs of the supply chain. This data is valuable and can help you to make better decisions in the future. Consider the following.
As you analyze expenses, you will be able to prepare more efficiently for future negotiations based on the performance of each element of the supply chain. This can help you to work towards reducing future costs.
You can also practice product rationalization by calculating manufacturing statistics with sales figures.
Why not take a minute to see how one company has employed efficient distribution techniques to sell the best dental supplies online.
When you apply this data, you not only reduce your own costs but are increasing the profitability of the entire chain. This accrues more than profits. It also builds relationships.
- Relationship Longevity
If you are expanding into international markets, whether for manufacturing or sales purposes, relationships should be your priority. If you find a good vendor and have a positive relationship with them, do all that you can to keep them.
This cannot be underestimated. Business operations run much more smoothly in every country when you take the time to listen to and understand what the other party is saying.
Building mutual trust and respect does take time. However, it will pay large dividends in the long term.
- Outsourcing Opportunities
As the relationship becomes healthier and trust grows from year to year, you may even find that there is an opportunity to outsource some activities.
You may be surprised by what a company is willing to do to retain a good relationship with you.
For instance, are you working with a manufacturing establishment? Over time you may build their trust. You may learn that they have a very large holding location for goods.
Thanks to your patience and good relationship over the years, you may find that you have the opportunity to use some of that storage space. This could significantly reduce your warehousing costs.
These types of outsourcing arrangements are only available if you develop relationships with each element of the supply chain from the beginning.
- Build with a Long Term View
You cannot control world economic conditions or international politics. Building strong relationships with vendors will give you the best chance of stability in an unstable world, though.
Although business efficiency is often seen as a priority, long-term efficiency means that you build relationships that will save you money in the future.
Companies who invest time into their relationships now, share their business plan for the future and involve vendors in their vision are more likely to retain them in the future when conditions change.
Sharing your business plans also shows that you want to trust the other party. This sharing of information means that you will not need to continually compete and negotiate over contract details. The other parties are aware of your goals and have the chance to get on board.
- Improved Communications
As you build a long-term friendship with supply chain partners, you will need to establish lines of communication. This will not only build trust but allow for the sharing of ideas. This can be key to overcoming problems and increasing efficiency.
There may be certain times when communication is a priority. This could be at the negotiation of logistics contracts or other agreements. However, lines of communication should always be open.
If communication is stilted or not bi-directional, it will be your loss. Your partners will likely be drawn in by other business opportunities. Keep your business partners as close a possible by communicating with them regularly.
- Shared Risk Management
Every business venture carries some form of risk. When you have a close relationship with supply chain partners and vendors you can minimize risk.
If the priority for both sides is the protection of the agreement they have made, they will share any risk.
Why Supplier Management is Important in 2021 and Much More
In 2021, a healthy supply chain is a key factor in supporting your business growth. However, in addition to this, relationships with individual elements or suppliers are also crucial.
By building solid supplier management systems you can ensure that your supply chain will support you for years to come.
If you want to learn more about these types of subjects, take a minute to check out our other blog articles.