In the promotional products business, the relationship between a supplier that provides the goods and a distributor that resells them to end buyers is critical for success.
In addition, supply chains are becoming increasingly complex, with multiple suppliers being tapped by organizations to produce their branded merchandise. With more pressure on the supply chain to keep costs down for the distributor and, ultimately, the buyer, it’s increasingly difficult to maintain healthy margins.
To keep profitability and efficiency at its peak, companies must apply a systematic approach to their sourcing strategy. That’s why supplier relationship management is critical.
In this issue of Promotional Consultant Today, we share four arguments for maintaining healthy supplier relationships from Amy Watson with Oxford College of Procurement and Supply.
1. Cost containment: When it comes to seeking out and negotiating new deals with suppliers, there are initial costs involved, but a supplier relationship management program can lessen or eliminate many of those costs. By establishing a mutually valuable relationship with key suppliers, a distributor has a better chance of achieving long-term cost savings by reducing problems with availability, quality and shipping delays. And as the supplier builds more confidence in the partnership, there could be more flexibility in the relationship, such as better credit terms.
2. Improved Efficiency. As the relationship with a supplier strengthens, communication improves, which enables each party to increase the efficiency of their service. Order issues will be reduced, and when problems do arise, they will be simpler to solve.
3. Consolidated Supply Chain. The more that distributors and suppliers understand about each other’s business, the more they may be able to help each other. This may require some adaptation on both sides, but it can contribute to increased operational effectiveness. For example, if the distributor is efficient about the number of suppliers it regularly buys from, then the buying and budgeting processes can be simplified with greater potential savings.
4. Ongoing Improved Operations. Building a long-term, healthy relationship between a supplier and distributor allows for ideas and feedback to be passed between the two, increasing the potential to improve all points of contact as well as customer service.
Take a close look at your supplier-distributor relationship strategy to make sure it is optimally benefiting your business, partners and customers.
Source: Amy Watson is with the CIPS Support team for Oxford College of Procurement and Supply. CIPS courses are recognized as driving leading edge thinking and professionalism in supply chain. CIPS now offers a portfolio of five professional qualifications which are offered worldwide, reflecting the global nature of the profession.
