The Benefits of Treating Suppliers as Partners
There are many aspects of the procurement function that are purely transactional. Suppliers provide goods and services and the organization pays for them based on a contract agreement.
But procurement leaders have long understood that their supplier relationships can be beneficial to long-term prosperity. Strategic partnerships with suppliers can yield substantial benefits to the business and even protect both parties’ interests during times of disruption.
Here are some of the benefits of treating suppliers as partners.
More Transparency
Businesses need end-to-end visibility into their supply network to be able to adapt to rapid market changes, disruptions, and shifts in demand. However, they also need end-to-end visibility to minimize risk and ensure suppliers are meeting their standards.
According to supply chain and procurement publication Spend Matters, "Knowledge is power when it comes to risk management. Being able to understand a supplier’s strengths and weaknesses allows you to plan more effectively for the future. Additionally, incorporating a sense of transparency optimizes decision-making on resourcing, disruptions, reputational risk, and more. This means fewer costly surprises in your supply chain."
Transparency is much easier to achieve if both parties are working together as partners.
Better Collaboration
Many organizations are attempting to onboard their suppliers into technology tools that grant each party visibility into the other’s operations. These tools also enable suppliers and procurement leaders to collaborate and solve problems at scale. This can only be achieved if there is a certain level of trust between the organization and the supplier.
Partnerships are built on trust, but they are also built on open dialogue between parties. When a disruption occurs, organizations and their suppliers need a workspace to share ideas and come up with solutions in real-time. This way, both parties can address standing issues and reduce risk across the supply chain.
Lower Costs
According to Harvard Business Review, external goods and services can represent as much as 70% of a company’s cost of goods. As such, organizations must search for every way to save on costs in their supply chain relationships. Even a small amount of savings can make a significant difference, especially if the company is engaged in a long-term purchasing relationship with the supplier.
If the organization has strong partnerships with its suppliers, procurement leaders can be on a better footing when it comes time to negotiate costs. Long-standing partnerships often unlock new opportunities for discounts and savings.
Improved Agility and Resilience
The past two years have highlighted the importance of staying agile in the face of supply chain disruptions. They have also made clear that strong partnerships between organizations and their suppliers are necessary to stay resilient during times of global change.
According to Kamala Raman, Senior Director Analyst, Supply Chain Practice at Gartner, in Supply Chain Dive, "Partnerships with strategic suppliers are essential to proactively model and design supply chain networks to balance cost efficiency and quality alongside agility and resilience to create a competitive advantage for the long term."
Make the Most of Your Supplier Relationships
Supplier partnerships aren’t a new concept, but they’ve grown in importance over the past few years. Those companies that had strong partnerships with their suppliers were often better positioned to address the many disruptions brought on by the COVID-19 pandemic.
Moving forward, companies must identify those suppliers that are critical to their operations. They must then form strong partnerships with them, so they can take advantage of long-term benefits and stay agile in the face of change.
If you’d like to know more about supplier partnerships, don’t miss the next ProcureCon Supply Chain Virtual Event, happening online at noon ET from January 19th to January 20th.
Register now to reserve your spot.