Quality over Quantity: How-To create Key Supplier Relationships.

Your procurement strategy, and more specifically — supplier relationship management — shouldn’t be a byproduct of circumstance or impulsivity. Supplier relationships should be built methodically, assessed objectively and nurtured strategically.

Suppliers aren’t just your vendors, they are potential strategic partnerships, and they need to be managed accordingly.

There is great value in locating, and leveraging, your key supplier relationships. This article will offer some quick tips that the Kodiak Rating team has picked up over years of servicing global procurement teams with SRM software solutions to make sure that you’re on a path towards quality over quantity in your SRM. It’s important to keep in mind that having a lot of suppliers is easy, but having quality suppliers requires engagement and consolidation.

Sometimes… less really is more, but that — unfortunately — doesn’t always mean less work.

What does the supplier relationship mean to you?

A procurement organization won’t know what kind of supplier relationship they have, or what kind of management should be applied, until a supplier collaboration runs a full end-to-end cycle or two.

Sourcing strategically is the stepping stone for risk aversion, and ensuring the chances you’ll find yourself in quality collaborations, but there is no way of knowing how a supplier will perform until they’re presented with an opportunity to supply.

After you’ve collaborated with as supplier, it can be smart to evaluate the value of the relationship to your organization, and from here you’ll be able to develop a calculated approach for managing the relationship.

As deemed by Daniel R. Krause, in his 1998 study titled, An empirical investigation of supplier development: Reactive and strategic processes, there are two main approaches to the supplier management process:

1. Reactive Approach — Where companies start managing the supplier relationships only when unpleasant situations with suppliers occur, and try to figure out how to improve the performance of unreliable suppliers.

2. Strategic Approach — Where supplier relationship management starts even before an agreement with supplier is signs, in order to ensure the competitive advantage of the company in the long run. This is a forward-focused approach, which can lead to a successful relationship even in the early stages (purchasecontrol.com 2018).

The approach your organization will take towards supplier management will be individual to the needs and infrastructure of your organization. Taking the strategic approach is a path focused on partnership and long-term success, but you’ll sometimes have to be reactive within a procurement strategy, because the risks of the global supply chain are a bit more complex than a deduction to two pathways of supplier management.

The question you and your procurement organization need to ask yourselves: What purpose does this supplier relationship fill within our overall value chain?

Align your Organizations

Strategic suppliers/Key suppliers can’t be seen as strategic partners unless if they share an understanding of your organization’s values and vision.

Communicating your vision, for collaboration, before a partnership commences is always a good choice. This allows the potentially strategic supplier to understand what they can expect from your organization, and vice versa.

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