Present business scenario
Modern businesses are becoming more complicated. The business & the economy as well are undergoing a major transition due to emerging technologies. The conventional approach of transaction-oriented marketing has now shifted to relationship building strategically marketing. During the course of changing times the concept of “Purchasing” slowly changed to “Procurement” as a function, and now it has emerged as Supply Chain domain which has got acceptance at a global level.
Procurement professionals are constantly engaged with number of suppliers, contractors, channel partners involved in logistics and warehousing, and other systems integration service providers. Now keeping in view of such a huge network of CPs, the key challenge lies in effectively handling them. These suppliers and contractors play a major role & contributing in making the organization stand outstanding on the competitive edge and business win. Once we accept that they too care of our businesses, the next foremost point needs to be addressed we need to manage the relationship with the supplier’s i.e. SRM (Supplier Relationship Management).
Here precisely it means we need to Learn to Listen, Listen to Learn from them. The interaction between both of them will figure out the areas of improvement in the performance of SRM. The success upholds the growth of both individually and collectively. The companies are allowing the suppliers to become more effective by providing various integrated quality platforms. In fact, now technologies are itself helping the industry experts to identify & select the suppliers.
Major key issues of the suppliers
Out of many, the major key issues are shortlisted
- Production capacity is overestimated;
- Supplier Assessment is done just for the purpose of fulfilling the ERP requirement;
- Focus is mainly on cost reduction without considering the future of impact on quality, delivery, compliance, etc.;
- Conflict over contractual terms;
- No firm planning or delivery schedules from the procurement teams;
- Transactions are carried out without formal contracts;
- Wrong ordering of items, and sometimes the specifications and the requirements are not clear;
- Suppliers are trusted more during the crises;
- Held solely responsible for non-conformities during the process;
- Resource constraints, for example, right-sizing the organizations, labor turnover, lengthy absence, liquidity and debt trap, frequent power failure issues and so on.
Yes, Partnering pays
Many professionals have realized that the supplier/contractor is adding value to their business. Many firms are taking interest in understanding as to what and how much is the value created by the supplier in the overall sustainable growth of the organization.
In short contribution from the suppliers, end is widely accepted which itself is a positive indicator supplier-customer relationship building.
How does it work? Supplier’s approach & contribution towards this collaboration?
- Improves competency. Here the supplier verifies how productive are the people and how much competent are the process? If needs he certainly drives to make necessary changes in the organization.
- Capacity building. Here we need to check whether the supplier has the capacity to deliver the order? If yes, what is the potential for growth? If not, what measures can be taken to make it happen? Suppliers take positive steps in improvising capacity building.
- Strong commitment towards quality. The supplier puts efforts and effectively monitors and manages quality standards set by the customer.
- Maintains consistency. Definitely every supplier tries to maintain the consistency in delivery & quality performances. He delivers quality products.
- Improves cost efficiency. The supplier keeping his operating costs minimum ensures his product or service offered in the market are at a competitive price.
- Control of process. Here the supplier tries to make certain changes and improves upon controlling its process and offer flexibility. It ultimately improves on-time delivery performance.
- Cash sufficiency. More focus is laid upon to ensure that the organization has a strong and enough financial base. This aspect is looked upon by entrepreneurs with personal attention.
- Culture. Usually, once there is a healthy interaction between the customer and the supplier, both try to make changes and ensure the culture is compatible. Both of them help each other to plan better deliveries to their customers.
- Compliance. The supplier tries to ensure he follows all the legal compliances as required.
- Systems & integration. Supplier supports the customer by adopting new technology and ensures to carry out the integration of systems to support collaboration and coordination in supply chain for increased performance in communication.
Listen & Learn from the Supplier
Let us look into how to address the issue.
The right way to overcome the challenges of mitigating the risks is to answer a few questions:
- How do we do that Learning?
- How do we do that act of Listening?
How to Listen & Learn from the Supplier
- Treat the suppliers as your equal partner. Even in some odd situations don’t hesitate to sit across the table with a truck driver for negotiation.
- Involve him – There shall be healthy knowledge sharing discussions. Try to take his expert advice when needed.
- Invest in him – Dedicate some time slot to discuss the key issues of business growth.
- Evaluate him correctly.
- Performance Improvement – Ensure to improvising Cost efficiency, Quality performance, Delivery performance, Reducing Lead time.
- Resolve the issues at the earliest.
- Learn, Unlearn, Relearn with him.
- Jointly mitigate financial & legal risks.
- Integrate with him through interface of tools, systems and technology.
- Appreciate him for his positive performances.
- Understand him and his concerns.
- Train him and his support staff when needed.
- Motivate him after the outstanding results.
- Allow him to share his views, and inputs for change and betterment of Quality & process improvement.