A strong buyer-supplier relationship is at the heart of every successful procurement process. Therefore, it’s important to consider each communication point from bidding to execution as an opportunity to forge a connection with suppliers. Are you taking advantage of every possible opportunity to build a positive supplier relationship during your procurement process?
The moment your organization sends out an RFP or RFQ is the first opportunity to make strong impressions on suppliers. Communication is key throughout the entire procurement process, but at the bidding stage it’s most important to be explicit and clear about what your organization is asking from suppliers. What is the project? What information do you need suppliers to submit? In what format? Via what method? The clearer you communicate expectations upfront, the easier it will be for suppliers to submit their bids and have confidence that it’s done appropriately. The clarity will also help create alignment for later steps in the procurement process. Here are some tips on setting up the clearest RFPs.
Security is also a crucial part of the bidding stage. Procurement is unfortunately prone to corruption and fraud, but your team can take steps to prevent this activity and assure suppliers that their sensitive information is safe. For example, in certain instances, sealed bidding can be an effective way to protect supplier data and interests. The use of e-procurement can also reduce compliance risk by ensuring data is handled consistently and securely.
While internal, the supplier selection process is still a valuable opportunity to create a delightful experience for suppliers. First, being able to select a supplier efficiently improves the experience by eliminating the need for extra communication and by shortening the process. Using technology like e-sourcing can help your procurement team easily compare bids apples-to-apples.
Communication also plays a large role in this step of the procurement process. Before making a choice, setting a timeframe for decision (and sticking to that timeframe) helps establish expectations with suppliers. It’s then important to follow through on that timeframe for all suppliers, not just the winning bid. Sending well thought out RFP “rejection letters” helps maintain the connection with those suppliers for future purchasing needs.
Once you have selected a supplier, you enter the negotiation phase. Don’t go into negotiations with an adversarial mindset. Use them as an opportunity for building up a positive relationship. In previous stages, you’ve kept open the lines of communication and you should continue to do so during negotiations. Your tender documentation should have included information on your objectives, and they should be re-stated clearly before going into negotiations. If you fail to communicate them beforehand (selecting suppliers based on lowest price only, for example), then when you try to negotiate contract conditions, things could get messy and damage your relationship.
Service-level agreements (SLAs) will be the outcome of a successful negotiation. Use them as an opportunity to create alignment, so both parties understand their responsibility and commitments to each other. It can be helpful to use supplier information management software to store these documents, so they can be easily accessed during execution. By creating a smooth communication process for one project, you set the stage for successful collaboration on future projects.
Now you’re ready for your purchasing needs to be executed! Proper planning and communication help make this stage the perfect opportunity to build a lasting relationship with the supplier. While planning the execution stage, make sure to build in time for exceptions. For both your organization and suppliers, there is little that is more frustrating than working within tight deadlines and having no room for error, particularly for extensive projects. Building extra time into the plan will help eliminate headaches for everyone involved.
It helps to look at execution through a long-term lens. By setting up periodic SLA review meetings with suppliers, you can compare the negotiated contract terms to actual outcomes. When these periodic reviews happen early and often, say quarterly or monthly rather than yearly, you’re able to solve any issues before they grow too big. Review sessions should also include performance evaluation for both sides. Create a two-way relationship with your suppliers by sharing information about your organization and allowing them to review you as a customer.
What else can you do to sustain supplier relationships for the long-term? Externally, you can work with suppliers to build two-way partnerships, rather than singularly exchange-focused relationships. This can take the form of long term agreements, or even supplier-enabled innovation. Internally, your organization can improve its processes and strategic planning to better plan for and manage supplier management. For example, investing in procurement technology to store and manage your suppliers and their specialties can help you maintain lines of communication.
Building supplier relationships is a crucial piece of the procurement process but can often be overlooked while purchasing teams deal with the minutiae of sourcing. Ensuring your procurement team takes small actions throughout the procurement process to focus on suppliers in conjunction with strategic planning, helps establish long-term and sustainable relationships with suppliers.