Fostering the Buyer-Supplier Relationship

(This article was first published on LinkedIn. We updated this version for recency and relevance.)

An efficient supply chain is paramount to business success, regardless of your industry, and whether you sell goods or services. For a supply chain to be successful, the buyer-supplier relationship has to work. 

(To be clear, in this case, you are the buyer in the context of your business/department sourcing the products of a supplier/vendor.) 

You already know this, but we’ll leave it said as a reminder.

Benefits of building long-term relationships with a proven supplier

Here are some of the advantages of having a buyer-supplier relationship that has stood the test of time:

• More effective communications: As the working relationship grows, suppliers that care enough will try to really understand the intricacies of your business as a regular customer. They will be able to put context into your communications. For instance, in my business, we have a customer that always orders a 'ball valve', which is a rather broad description of the product. However, we know from experience, that what he wants is a full-flow ball valve. No guesswork needed.
   
• Continuous operations: External global supply chain forces aside, your risk of having an unexpected downtime due to inventory shortage is significantly minimised, since your supplier is most likely keeping your frequently bought items in stock, if they know you buy it from them regularly. In addition, you should be the first to know when a supply shortage is imminent, and you may very well be supplied with the last, remaining stocks if shortages hit. This has certainly been something we have been doing over the past 12 months. Whilst we value every sale, when shortages have struck, we’ve chosen to support our regular customers rather than the ‘randoms’ or irregular ones. Ultimately, it is human nature to help those who help us. It is a symbiotic relationship.
   
• Better pricing position: We’re not just talking volume leverage here. It’s easier to offer “mate’s rates” to regular buyers, even if they don’t always buy in bulk. Once again, over the past 12 months, as some significant price rises have hit, we’ve been able to supply some of our regular customers with existing, lower-cost stock before buying fresh, more expensive stock.
   
• (Possibility of) Financing option: This is possible with some suppliers, especially for a buyer who’s always been prudent enough to make prompt payments. It would have been proven over time by smooth transactions in the past.
   
• Consistent quality: As you get your components, parts, materials and equipment from the same proven source, you worry less about getting sub-standard output that’s prone to costly defects, returns and customer complaints. As we all know, consistency is the key to quality control.

How to cultivate a strong buyer-supplier relationship

As a buyer:

1. Have realistic expectations: Set clear goals from the get-go and be reasonable about your demands. Try to be as detailed as possible when putting them in the service level agreement (SLA), if you have one. It’s a good idea to review it periodically, as circumstances for both parties can change over time.
    
2. Give reasonable lead times: Providing allowances on your expected delivery dates not only minimises risk of delays and downtimes, but also helps you consistently meet production deadlines. It’s best practice to specify your preferred lead times in the SLA.
    
3. Escalate issues promptly: Try to do this immediately as the problem occurs on first instance. It would help the supplier to avoid repeating mistakes that may later snowball to bigger problems.
    
4. Pay on time: This one is obvious, but try to have good payment discipline. Your supplier will really appreciate it. And, of course, it’s Murphy’s Law that the day you desperately need some product delivered will be the day the supplier’s accounts department puts you on credit hold. Of course, as I mentioned earlier, if you have a strong relationship and are usually reliable with your payments, suppliers are much more likely to cut you some slack when you really need it. 

As a supplier:

1. Take every order seriously: This should be the first and most important item on every supplier’s list. Not taking orders seriously breeds a lot of irresponsible behaviour, such as making empty promises and taking for granted proper quality checks and prompt order fulfillment. Surely, occasional hiccups may be inevitable, but make sure to fix it fast.
    
2. Have sensible foresight: Barring exceptional logistical disruptions like COVID19, suppliers should be keeping up to date with product demand and availability cycles. Keep in mind that there are always factors beyond your control.
    
3. Communicate: Share information about relevant circumstances that could have an impact on your buyer’s supply chain, so they can plan accordingly. Offer solutions and alternatives when you have them. Like they say in business, there’s no such thing as over-communication. Early in our managing director's career, when he was working in the steel industry, a project supervisor told him, “Paul, I really want my steel in the morning but, more importantly, if you are NOT going to deliver it in the morning, let me know ASAP because if I have 10 guys standing on site with welding torches in hand and no steel, I’m going to be seriously pissed off. If you call me early enough to let me know the steel isn’t coming then I can cancel the welders. I won’t be happy but the outcome will be a whole lot better.”  He has always remembered those words and they've served the well.
    
4. Deliver on time: As both parties know, time is of the essence when it comes to production. This applies when you’re delivering goods and services to your buyers and even their customers (if you offer drop-shipping). Be mindful that delays in order fulfilment can negatively affect your buyer’s deadlines, which could consequently affect their bottom line. DIFOTIS (Delivery In Full On Time In Specification) has always been a great way to break down supply challenges in a business and, over time, improve performance.
    

Why build relationships with suppliers?

A reasonable supplier will value the trust of his/her buyer and reciprocate it with good treatment and respect.

It’s simply because, as people, we tend to want to work harder to please those with whom we build strong relationships.

It all boils down to human nature.