Jeremy Ferrer
Webinar :
Matinale Achats de Lyon
Vendredi 14 Février de 9h à 12h30
To be competitive in the market, it is important to deliver to the customer quickly and well, while controlling costs. One of the ways to meet these imperatives is to optimize the supply chain by improving the relationship with suppliers. Maintaining relationships with suppliers is essential for a company to ensure its sustainability. Indeed, being an essential component of its global and specific strategies, suppliers can make it successful or, on the contrary, cause its loss. Throughout this article, discover six different ways to build a healthy and beneficial customer-supplier relationship in order to optimize your logistics flows.
The supplier-customer relationship is an essential aspect of business management, as it is the key to their success. To improve this relationship, it is important to implement relationship management based on trust, collaboration and transparency. First, it is essential to establish a good relationship with key suppliers. This involvesidentify strategic suppliers and to work closely with them to develop lasting partnerships. Effective management of relationships with suppliers makes it possible to create a win-win relationship, where the interests of both parties are taken into account.
Before talking about the supplier relationship, let's first define what a supplier is. It is a natural or legal person who satisfies the need of a customer by providing him with the product or service he requests. This need is expressed materially via an order form or a signed quotation.
The customer-supplier relationship is thus a concept that highlights the relationships or links that a company maintains with its suppliers. It is both a commercial and financial link materialized by a contract.
Good customer-supplier collaboration must be based on at least five aspects: mutual trust, quality exchanges, continuous listening, a lasting relationship and a financial link.
In a healthy and sustainable relationship with customers and suppliers, everyone will have to make their contribution to improve results. On the one hand, the company must clearly express its needs (product description, quantity, price, deadline...) and proceed with the payment. On the other hand, the supplier must supply and deliver the products in accordance with the terms of the contract and ensuring that they comply with the needs of the customer.
Although we have always thought that customers are the main actors in the profitability of a company, we now realize that without its suppliers, it could not exist either. To make its activities work, it needs to source raw materials, equipment, components and services of all kinds. Without a good relationship with its suppliers, it will therefore not be able to guarantee the stability of its production cycle or its logistics chain. However, this factor is crucial to ensure the sustainability of its activities.
The realization of the importance of a good relationship between suppliers and the customer and the appearance of new challenges that Purchasing departments are facing today (evolution of technologies, development of trade, strong competition, evolution of regulations, etc.) are pushing managers to implement a good supplier management strategy or SRM (Supplier Relationship Management). More than ever, the company must ensure the reliability of its supplier partners, but not only that. It must also build a lasting relationship with them.
Long gone are the days when the customer is considered to be the “all-powerful” who imposes his wishes and deadlines on a supplier who has no choice but to comply. We are increasingly focusing on the concept of “partner” and on establishing a win-win relationship. It is an essential component of the success of a business. Thanks to it, can remain competitive and control its costs. Indeed, a relational tension between the company and its supplier is synonymous with additional costs. These costs represent 2% of French GDP, or 50 billion euros. According to statistics, 25% of business bankruptcy cases are due to an unhealthy supplier relationship, more precisely to late payments.
The benefits of a healthy relationship are numerous:
Contrary to what some people think, a lasting supplier relationship does not end with establishing a relationship of trust with service providers. It also involves the establishment of an optimized and shared working method where each party is aware of its role and involved in the sustainability of the relationship. So here are 6 tips to improve the relationship between customer and supplier:
Before you even think about improving relationships with suppliers, start at the beginning. Remember to put them on a healthy basis. A good relationship with suppliers starts from the prospecting or sourcing phase. For a successful customer-supplier relationship, you must choose providers that meet your needs and expectations.
Supplier sourcing is an approach that consists of researching, comparing and evaluating suppliers. An essential step in Purchasing process, it allows the company to identify its future partners. This work of selecting suppliers must be done according to a coherent strategy. Set up a rigorous selection process that takes into account your needs and the criteria you are looking for in your future partners (size of the company, seniority, turnover, price, delivery times...). List the criteria you are unyielding to and the criteria you can make concessions to. It's up to you to define what is most important to you, and to make a choice based on these criteria. Rank them in order of importance. Identify your key suppliers—those whose business is essential to the smooth running of your business, and who you can't live without and focus your efforts on them.
More than a simple mapping of potential partners, the supplier sourcing stage should not be limited to choosing the supplier (s) that best suit you. It should also include a risk management component. It is imperative to assess the potential risks associated with negotiation in advance. We are never safe from a supplier failure that may negatively impact your supply chain, or even the image of your company. One of the ways to assess the reliability of a supplier, and thus the risks it represents, is to carry out a supplier audit.
Do some supplier sourcing is a complex and time-consuming process. However, you can automate it by opting for a complete Source-to-Pay solution, like Sourcing Force. This solution of digitalization of purchases allows you to save time and increase efficiency when looking for and selecting the best suppliers.
The most sustainable form of collaboration is one in which everyone wins. The relationship between a company and its suppliers is no exception. When both parties get real benefits from the relationship, they have an interest in keeping the relationship going.
One supplier relationship Win-win builds supplier loyalty without economically penalizing the company. Thus, during negotiation or renegotiation sessions, care must be taken not to pull a rope. Requiring a price that is too low or a deadline that is too tight can frustrate a supplier and scare them away. You have to find the best compromise.
We should not only talk about financial benefits. Other forms of advantages are also in the running, such as the sharing of experience, reputation, etc. A good customer-supplier relationship must allow the other to benefit from its influence, its network and its reputation.
To succeed in these exchanges that are beneficial to both parties, it is necessary to establish a climate of trust, listening, mutual respect and understanding. Certainly, a relationship between a customer and a supplier is a business relationship. But complying with the terms of the commercial contract is not enough to create a lasting relationship. You also need human qualities, such as empathy. Caring about the problems of your partners is a way to gain their trust and create a beneficial relationship.
One of the keys to a good supplier relationship is communication. Focus on a relationship that promotes transparency and regular exchanges. Encourage communication and exchanges, both internally and externally. Establish a favourable environment where you, your employees and your suppliers can interact and communicate constantly. This allows you not only to share information in real time, but also to be able to react quickly in the event of an incident, such as a late delivery... The search for a solution can then come from both sides. By being involved in the process, your suppliers will be able to provide the solutions themselves to the problems encountered. The objective of good communication is to avoid conflicts as much as possible, which can have significant economic impacts on your business.
The provision of collaborative tools, such as the creation of a supplier portal, can also facilitate communication between you and your suppliers. These digitization tools allow better management and a better methodology for managing relationships with suppliers.
After the supplier selection stage, comes the negotiation stage. Several agreements can be found during these sessions. This may be about prices, but not only that. Negotiations can also focus on delivery conditions, the methods of collaboration to avoid disputes, methods of resolving conflicts, and even the sanctions to be provided in case of non-compliance with the terms of the contract.
To build a lasting supplier relationship, it is important to put all this information in writing. Establishing detailed and transparent contracts will serve as a beacon in the relationship and will avoid confusion.
Despite the fact that everything is clear from the start, do not hesitate to organize regular meetings to monitor the evolution of the collaboration and to modify certain conditions if the previous ones are no longer appropriate. Thus, a delay in delivery or non-compliance with the order book is not necessarily dramatic if solutions are quickly found during debriefs organized from time to time.
At a time when more and more companies are integrating CSR, or social and environmental responsibility, into their global strategy, the question of respecting payment deadlines is more important than ever. Paying suppliers on time is the basis of a virtuous customer and supplier relationship. The automation of invoice processing, an integrated feature of Procure-to-Pay or P2P solutions, makes it possible to control payment terms.
The digitalization of supplier-customer relationship management processes can also contribute to improving this relationship. The dematerialization of invoices, for example, makes it possible to speed up payments and reduce payment deadlines. Likewise, automating billing and procurement processes makes it easier to manage relationships with suppliers by reducing the risk of errors and optimizing deadlines. To promote a sustainable supplier-customer relationship, it is also important to take into account criteria such as the quality of relationships, compliance with deadlines and customer satisfaction.
Digitizing processes is a step that all businesses must go through sooner or later. Purchasing processes are no exception. Thanks to Procure-to-Pay solutions, such as Sourcing Force, it is possible to give more efficiency and performance to the purchasing department team. By being freed from the repetitive, and non-value-added, tasks of the procurement function, such as invoicing, they can focus on higher value-added assignments. According to a survey carried out by OpinionWay, the dematerialization of invoicing or e-invoicing makes it possible to improve the relationship with suppliers.
Technology is a facilitating lever for establishing a win-win relationship, because it allows — using tools deployed across the Company — to obtain a global view of suppliers.
Sourcing impacts the entire company and it must be selective: the “good feel” is not enough as in the past.
The management of contracts with suppliers is essential, as it makes it possible to clearly define the conditions of collaboration and the expected levels of service. In addition, collaboration with suppliers can be strengthened by the establishment of certifications or labels relating to the management of the supplier-company relationship. These labels, such as the relationship label or the ISO standard, can be used as standards to assess and improve the performance of suppliers.
The Liker & Choi (2004) study conducted by manufacturers Toyota and Honda, presents the 6 stages of a “hierarchy of purchaser-supplier partnership”, integrating:
A tool such as the Kraljic matrix makes it possible to segment suppliers, in particular on the basis of product specifications, costs, integration, etc. A high level of interaction makes it possible to build ongoing relationships, which are necessary for one-off technical purchases.
In summary, in an ideal industrial world, each party should be attentive to the business process. The buyer should be receptive to the supplier's ideas in terms of innovation and the supplier should consider the internal workings of the buyer for the smooth functioning of the supply chain.
To maintain a harmonious supplier-customer relationship, it is essential to ensure supplier satisfaction. This includes respecting payment deadlines, recognizing the work done and adopting responsible purchasing practices. Retaining strategic suppliers is a major challenge to ensure the continuity of supplies and guarantee the competitiveness of the company.
Improving the supplier-customer relationship is based on effective management of relationships with suppliers, based on trust, collaboration and transparency. The implementation of tools such as CRM, ERP or software packages dedicated to the management of the supplier-company relationship can facilitate this management while promoting better coordination within the supply chain.
By working closely with its key suppliers, respecting payment deadlines and promoting responsible purchasing practices, the company will be able to create added value and improve its competitiveness in the market.
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