The importance of dealing with suppliers
Dealing with Suppliers,Supplier performance is the key to a well-equipped supply chain, therefore, a good relationship with these performance suppliers is the key to a thriving business.
For example, you are running a clinic or a nursing facility, so you will need efficient material suppliers that meet the needs of medical equipment, such as surgical instruments, mobility aids, and disinfection products. Suppliers are essential at every touch point.
Accordingly, ensuring a strong relationship with your material suppliers enables your business to provide better services and purchase effectively.
Who are the suppliers in the business?
In a business, a supplier is a person or entity that provides first-class services and goods from manufacturers at reasonable costs to retailers or distributors for sale.
They provide deliverables in the form of raw materials, which manufacturers subsequently process into finished products ready for the market.
Suppliers act as an intermediary between producers and retailers. They also ensure that the required stock is in sufficient quantities.
Here is a simple example to understand. For example, a coffee shop purchases various ingredients needed to prepare coffee from different groups of suppliers.
One material supplier delivers coffee beans, another delivers sugar (white and brown), and another delivers ovens and roasters, so this whole cycle depends on these suppliers.
The difference between sellers and suppliers
In the supply chain, you often hear people use the terms seller and supplier interchangeably because both are common (and important) participants in supply chains.
However, while both offer products and services, they differ in certain areas, underlining their uniqueness in the field of supply chain.
Let's delve into the matter.
Suppliers provide necessary goods and services to the company, while sellers sell goods and services to customers at a certain price.
Suppliers are associated with business-to-business (B2B) sales relationships. On the other hand, sellers are related to B2C sales relationships.
This is how a typical supply chain works: supplier > factory > distributor > seller > consumer.
Therefore, suppliers are the first link in the supply chain, while sellers are the penultimate entity in the entire flow.
Suppliers sell deliverables to businesses for resale purposes, on the contrary, sellers sell deliverables to customers for use purposes.
While suppliers usually provide a certain type of product to mass producers, sellers include a large selection of products and offer to end users in small batches.
Importance of suppliers in procurement
Suppliers play an essential role at every stage of the product life cycle, and while the product life cycle can be small or large depending on the size of the organization, companies cannot afford to put their relationship with their suppliers to the test.
Read on to know the advantages of strong cooperation with suppliers:
Innovation and industry intelligence
As the material suppliers communicate directly with the industry, they provide new suggestions for the comprehensive development of service and product.
Based on the company's understanding, suppliers help create ideas fit for purpose, thus unleashing product innovation by increasing its bet on others.
For example, a company that develops innovative technology-powered coffee makers will stay ahead of the curve.
Product delivery on time
Consumer confidence depends on reliability, which depends more on time and delivery. This means that if the back end (suppliers) delivers the goods to you on time, you can maintain the inventory turnover ratio.
Thus, you can track cash flow and reduce the risk of wasting inventory.
And since you can finally deliver on-time and flawless finished products, your customers will love investing the money in your portfolio.
However, the benefits extend to the manufacturing stage. You'll develop products quickly, avoid returns, and build quality-centric offerings.
Financial support
Dealing with suppliers helps you handle finances on their side, for example, suppose your business is running out of liquid assets.
In this case, the material suppliers will conserve your resources by offering additional financing in the form of an extension of the payment deadline or even an investment in your organization.
Provide a competitive advantage
Suppliers help you stay ahead of the competition in the marketplace; It will keep you above par with regards to pricing, quality and ease of use of the product.
What is Supplier Relationship Management?
Supplier Relationship Management (SRM) is a systematic approach to strategically managing categories of supply for optimum success and profitability. It's the go-to for supply chain professionals who regularly address suppliers in project management, procurement, and operations.
Often called the B2B equivalent of Customer Relationship Management (CRM), SRM involves identifying the strategic value of all suppliers and creating a scorecard for suppliers according to their contribution to your business growth.
Then, you can develop strategies to enhance this performance by establishing and leveraging strategic relationships with key suppliers in the business plan.
The benefit of relationship management in dealing with suppliers
Cost cuts
With better visibility, companies can identify hidden expenses and take action to turn them into cost efficiency.
Furthermore, strong supplier relationships help companies negotiate things like better discounts, prices, delivery cost discounts, and volume limits.
Likewise, manufacturers and suppliers can partner on payment terms, contract length, surcharges, and other incentives to work to boost profit margins.
read more:
Negotiating with suppliers
The 7 most important points when communicating with suppliers