No matter what kind of product or service you’re selling, your base of suppliers is going to play a massive role in the overall success of your business. To make sure you’re getting real value out of your suppliers, you need to have a robust and functional system in place for monitoring their performance. Despite the hugely important role of suppliers, there are many business owners who totally neglect them, and fail to utilize them like the assets they are. If you’re worried about this happening at your company, here’s how to get the most out of your supplier relationships.
The one thing you should do right at the start of any supplier relationship is establish performance indicators. In any supplier relationship, there are going to be certain qualities which both parties will need to show and maintain. This will keep the partnership running properly. To make sure this happens, you need to create specific performance targets for evaluating and monitoring your suppliers. This needs to go on from the outset, and then on an ongoing basis. Ensure that the criteria is tailored to your supplier’s size, financial stability, complaint history, and their quality management systems. If you can’t keep tabs on how well your suppliers are performing, it will make it very hard to know you’re getting the most out of them.
Another good step in getting the best possible performance out of your suppliers is dividing them up into different categories and groups. These should be based on how critical they are to the continued success of your business. Technological solutions like contract software can be a massive help here. Consider the impact your various suppliers have on your product or service, and rank them in the order of their importance. When you have a clear idea of how important different suppliers are to your business, you’ll be able to invest more of your time measuring the performance of those partners who are the most essential to your business.
The next thing you have to do is start work on a customized evaluation method. There are all kinds of ways you can measure and rate the performance of a supplier. Surveys, evaluation forms, software and system metrics may have all crossed your mind. However, if you forget about all these and develop a bespoke method, you can have your own teams evaluating how your suppliers are doing. This will allow you to review the number of corrective actions you’ve had to take, the amount of products you’ve had to return or scrap, and the number of customer complaints which can be traced back to the poor service of your suppliers. At the end of the day, you need to be able to come up with reports and measurements at the start of the partnership, and then maintain those throughout your time with that supplier.
Once you’ve got this bespoke measurement system in place, you need to decide who’s actually going to be managing it. Choosing the employee at your business who’s going to be responsible for reviewing the metrics and the partnership in general can often be as important as choosing a supplier in the first place! Obviously though, you can’t have your best man on the job through the whole working week. However, now that you’ve ranked your suppliers according to how important they are to your business, assigning managers will be much easier. If you have one supplier who’s truly pivotal to the existence of your business, then have your more senior managers take care of evaluating them. However, when it comes to suppliers who aren’t all that essential, you’ll only need the procurement team monitoring their performance. Still, when you’re dividing your managers like this, it’s important to make sure even the more trivial practices are kept to a high standard.
Finally, be fair but decisive when it comes to dropping suppliers. If you’re treating your suppliers fairly, and giving them more business for a job well done, then they should return it with continual, good performance. I believe every professional relationship can be improved somehow. However, there are certain suppliers out there who simply can’t deliver what you had in mind for your business. If you have to give them a warning that they’re slipping behind, then do it, but give them the opportunity and support to correct the issue. However, if this poor performance keeps up, and there’s no feasible way to correct the situation, then you’ll need to drop the supplier. If these trade partnerships aren’t “win-win”, then they’re not worth keeping.
Founder Dinis Guarda
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