There are countless reasons why it’s essential for companies to build and maintain strong relationships with their suppliers. Good relationships with your suppliers mean your business operations will be smoother with no downtime at all. They also eliminate the risk of missteps and errors rooting from lack of communication and transparency.
In this blog post, we’ve rounded up some strategies to build healthier relationships with suppliers to help you make your business operations profitable and smooth.
But before we start explaining ways to ace SRM, let’s take a look at what Supplier Relationship Management (SRM) is.
What is Supplier Relationship Management?
In the simplest terms, SRM refers to the interaction between businesses and third-party suppliers that ensures the availability of required goods, raw materials, and other resources for uninterrupted business operations.
While it sounds simple, and that’s exactly how it used to work decades ago, modern commercial operations have changed dramatically. You are now faced by a pool of online suppliers and third-party supply chain management software scattered across the globe. Picking the best supplier that syncs with your business requirements and then managing the bond with that supplier is no longer a piece of cake.
However, using emerging strategies that don’t just focus on maximizing profits, but also emphasize on maintaining healthy business relationships with suppliers, can help businesses master SRM.
Supplier Relationship Management Back in the 80’s
In 1983, Peter Kraljic, a McKinsey consultant, put forward his idea of SRM in a Harvard Business Review article, called “Purchasing Must Become Supply Management.”
According to the earlier concept of SRM, relationships needed to be more strategic and focused on growth. Later, in 1998, Daniel R. Krause released another study “An empirical investigation of supplier development: Reactive and strategic processes,” which proposed two perspectives for the process of supplier management: reactive approach and strategic approach.
Reactive approach:
When a company adopts this approach, they work over their relationships with the suppliers and their performance only when they are faced by unpleasant or unfavourable situations. This perspective of supplier management results in an increased consumption of financial and human resources, and valuable time that could’ve been invested in more important business operations.
Strategic Approach:
Companies that follow this approach begin working on strengthening their relationships with suppliers as soon as they partner with them. They don’t wait for turbulence to take action. This proactive approach enables businesses to have an edge on their competitors and cultivate healthier, successful, and proliferating relationships with their suppliers.
Businesses that partner with third-party suppliers have continued to benefit from the strategic approach to improve bonds with suppliers and improve profitability. For instance, the innovative business giant, Apple, is highly-reputed for seamlessly managing its supply chain, which enables the company to produce technologically advanced products in large quantities to ensure they never go out-of-stock.
Here are a few more ways to improve your relationship with your suppliers:
How to Build a Stronger Bond with Your Supplier
Invest in a Dedicated SRM System
According to a Global SRM report released by the State of Flux in 2017, human interaction and the soft skills that humans possess are the keys to a successful supplier relationship management (SRM). So, whether you assign the responsibility of SRM to an entire team or just one person, it’s important to have people in your team who are dedicated to managing relationships with suppliers.
Develop a process including flowcharts, SOPs, policies, regulations, or a simple document comprising all the details of the agreement between the supplier and you. Make sure that no important detail is missed, and the document is signed by upper management personnel before being passed on to the supplier.
Working in this manner has proven to increase supplier engagement by 37%, according to the Flux report. It also strengthens bonds between companies and vendors, as both parties work toward a common goal—maximizing profits and business growth.
Expand Globally – Act Locally
With globalization taking over, it has now become more important than ever to connect with suppliers from around the world. However, as you begin working with suppliers based across different states, countries, and regions, you need to have a keen eye on their cultures and traditions.
Considering cultural differences and adapting to the suppliers’ language and values while dealing with them will lead to healthier and long-term bonds with suppliers. You also need to be mindful of the differences pertaining to the currency value, taxes, VAT rates, government regulations, and time zones.
Transparency Is the Key

Like in any other relationship, transparency and communication is also extremely important in managing relationships with your suppliers. It helps create mutual understanding, while also eliminating errors, hiccups, and any risks of misunderstandings, such as incorrect purchase order or missing inventory. To establish smooth communications, businesses need to create structures that allow for better flow of information,
Paul Noël, Senior Vice President Procurement, Ivalua, explained in one of his articles,
“Having the right tools in place that allow both internal and external teams to quickly communicate and share documents and other information will help facilitate a more transparent, even-sided conversation.”
If your company has the required human and financial resources, it’s viable to develop a supplier communication network. For inspiration, let’s take a look at Tesco. John Tarry created a network of suppliers for smooth communication, sharing ideas, and continuous improvement of consumer products.
Leave a Positive First Impression
Never forget that your suppliers aren’t just “providers” of goods, materials, and resources; they are your business partners. The moment you sign a deal or agreement with them, you are legally bonded in a partnership with your suppliers and both parties need to abide by certain regulations.
Keeping your suppliers in the loop and updating them about your business progress and new product releases fosters a sense of belonging among the suppliers. Companies should also ask vendors to pitch in their ideas for any improvement in the products or processes. This will help you gain insights into what your suppliers expect from you.
Also, be mindful of the tone while communicating in person, through email, or on call with your supplier. According to research, 93 percent communication is based on non-verbal components, where 38 percent depends on your tone.
Know Your Suppliers Well
Just like you need to understand your customers to develop the right product, marketing strategies and placement plans; you need to understand your suppliers to create a mutually profitable deal.
According to The Harvard Business Review (HBR) , Toyota and Honda are two successful examples of how understanding suppliers play a critical role in a company’s success.
‘Toyota and Honda believe they can create the foundations for partnerships only if they know as much about their vendors as the vendors know about themselves.’
Find out how where your suppliers stand in their markets. Look up who their investors are and if their company is publicly held. Also, learn about your suppliers’ vision, mission, company’s values and structure, recruiting processes, and their primary and secondary operations. With all this information, you’ll be better equipped to sync your business requirements with theirs, and progress together.
Nothing Can Beat Face-To-Face Interaction
The world has digitalized significantly over the past few years, with over 20.3 million online shoppers as of January 2019—an increase of five percent from the preceding year. Businesses are going online, because that’s where the customers are. To cater to e-commerce businesses, suppliers are also going digital.
But despite all the digitalization, it’s still crucial to one on one interactions. You don’t have to do multiple meet ups or spend days together—a formal or casual meeting over lunch where both parties could get to know each other better does wonders. According to a Forbes research, 80% of professionals prefer face-to-face meetings with their business partners.
Don’t Make Your Supplier Wait for the Payment
If you’ve found the right supplier for your business, don’t risk losing them because of delayed payments. Make all the payments before the deadline and document everything to eliminate the risk of any discrepancies in the long run. If you think you won’t be able to make the payment on time, for any reason, inform your supplier ahead of time and decide on another date. If you’re facing trouble with order management and spending, order management software can help keep better track and mitigate errors.
About OrderTron
If you’re in the food industry and are looking for ways to manage your suppliers effectively, get in touch with OrderTron. Our online order management software is especially designed for both customers and suppliers in the food and beverage industry to run their businesses seamlessly without hiccups.
To find out more about our B2B order management solutions, get in touch with us at +61 2 8599 8830.