Businesses place a lot of importance on keeping their customers happy, yet forming excellent relationships with suppliers can actually be the key to business success. Here’s why.
When it comes to working on and analyzing supplier relationships, there are various models and theories to understand. While creating strong relationships with suppliers doesn’t have to get too technical, it is important to understand the foundations from which you should be building the right kinds of relationships.
The first idea in relation to supplier relationships and experience is that of supplier relationship management (SRM). Most of us know about customer relationship management (CRM), with many businesses investing heavily in CRM systems and technology. Yet when so much focus is placed on customers – keeping them happy and providing them with a great service – the idea of SRM can fall by the wayside.
Supplier Relationship Management (SRM)
The idea of SRM is for businesses to implement a consistent approach to assessing and evaluating suppliers. SRM is very much about the supplier’s performance from the perspective of your own business. It involves a system for rating and evaluating each supplier you work with – often with a scorecard-type approach – so supplier performance can be compared and contrasted. Businesses are ultimately scoring suppliers in terms of how much they contribute to the company’s success. Once a consistent scoring system is implemented, it makes it easier to identify areas for improvement.
Improving a relationship with a supplier using this method depends on what areas for improvement have been identified. If a supplier is deemed critical to business success, then there is more urgency to improve the relationship, as company profits may be at risk. Supplier managers often find themselves using this model to identify their top suppliers that are critical to business success, and focusing on making those relationships as robust as possible.
Supplier Experience Management (SXM)
A limitation of SRM is that it tends to consider suppliers in terms of what the supplier can do for the company. The interaction is less of a relationship and more of a one-way street. This approach can work fine when there are no additional factors at play. After all, the business gets its products or services, and the supplier gets paid. It’s a simple transaction and everyone’s a winner.
But what happens when things change in the supply chain? Perhaps a supplier cannot transport its products because of travel disruption or a natural disaster. The supplier may come across a situation where it cannot source enough of its products, so has to decide which of its clients to sell to. Or maybe your own customers’ needs have changed quickly due to an unforeseen external situation, and you want your business to be agile enough to respond. Do you have the right relationships with your suppliers to work more closely than simply at a transactional level?
These are all things businesses need to think more about, particularly when many of these issues have become a reality due to the Covid-19 pandemic. This is where establishing deeper relationships through supplier experience management (SXM) comes in. Supplier experience considers each and every interaction a business has with its suppliers. It thinks in terms of mutual success, rather than the relationship being a transactional one-way street. And it looks at personalizing the approach to the relationship depending on the supplier, with a more realistic picture of the mutual working arrangement.
What Does A Good Supplier Experience Look Like?
Thinking about how a supplier views your business is a good first step towards understanding the reciprocal experience of working together. Identifying common goals is crucial, as this is where you can find the fundamental purpose of working together. Once a good dialogue is established between a business and supplier, you may be able to identify opportunities to work more closely together. Developing new innovations that make the most of your areas of expertise is one benefit. You may also be able to jointly improve the quality of your products or services by pooling your expertise.
Becoming more closely aligned with your key suppliers can only mean more success for both parties. It also leads to better business resilience. If the world changes in some way and there are supply chain issues, you will be a favored client of the suppliers who have a good experience of working with you. And for those who have so far focused mostly on CRM over supplier experience, it is important to note that research shows that customers can tell when a business has great relationships with its suppliers. After all, it makes the service to customers slicker, quicker and reliable. The quality of the products or services they buy is better – and improves over time, thanks to the ongoing innovation that great supplier experience engenders.
Ultimately, supplier experience matters because the profitability, resilience and brand of businesses matter. And businesses can only make the difference they want to make with brilliant suppliers behind them every step of the way.