Why Vendor Relationship is important in Supply Chain?

A good relationship between vendor and customer is the lubricant for any supply chain. In a study, it is said that 20% – 30% of a company’s profit can come from savings generated in the purchasing department and one of the important objectives of the purchasing department is to maintain good relationships with vendors. It is not easy to find a vendor who supplies the proper quality material in proper amounts in proper time. There are many situations where materials are required in a hurry. There are situations where materials are in shortage in the supply market. In all situations, good relations with vendors pay additional dividends. Therefore, here are a few reasons to start cultivating meaningful vendor relationships

Focus is on the relationship

In today’s world, managing the supply base is about strengthening relationships that can make or break your business. Earning your suppliers’ trust with honest communication, listening to their concerns and involving them in your processes ultimately make them a vested partner in your business.

Expectations are changing

Procurement is expected to know where they are vulnerable and bolster their teams for success. Teams that put a greater emphasis on qualitative and quantitative supplier data analysis will be able to quickly and succinctly identify weak spots, risks and opportunities in the global supply chain – improving the strategies and plans needed to manage the suppliers, and ultimately both businesses, for continued success.

Mutually beneficial

If you are aligned with your suppliers and treat them as partners, both businesses will experience higher success rates, decreased risks and enhanced collaboration and innovation. Studies have found the top procurement teams that have successfully aligned with their key suppliers have improved supplier capabilities of innovation, quality, reliability and costs/price reductions and agility to reduce risk factors. Greater value can be achieved for both businesses, something that would be difficult to achieve if operating independently.

Delivers big opportunities

Successful vendor relationship yields a faster time to market, transactional efficiency, competitiveness, risk management, and large financial gains – all of which not only contribute to your bottom line but also allow you to deliver a quality and cutting edge product, putting you ahead of the market.

Technology can simplify the process

The key to effective vendor relationship is having a system in place that makes it easy to view your suppliers and analyze all of the risk factors. Using vendor relationship technology provides you with full and unparalleled visibility into your supplier base, giving you a detailed picture of what is impacting your supply chain and making it easy to mitigate the risk.

The modern management theory and world-class manufacturing call for a long term, almost a lifetime, association with the vendors. This also means that there will be fewer vendors but these will be dedicated vendors almost as a part of the organizational family

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A.Sulthan, Ph.D.,
Author and Assistant Professor in Finance, Ardent fan of Arsenal FC. Always believe "The only good is knowledge and the only evil is ignorance - Socrates"
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