For many owner-managers, expanding their business is a key objective and although growing their supply network may be required, focusing too heavily on the quantity rather than on the quality of supplier relationships can be detrimental. By solely concentrating on the number of suppliers, the business could miss out on opportunities such as flexible payment terms and favourable deals to enhance their cash flow.
More than meets the eye
In the current uncertain economic climate, it’s especially important to exploit all possible opportunities, including developing close supplier relationships. For instance, gaining suppliers’ trust by continuously paying on time, makes it more likely to gain a good relationship, which in turn might increase the business’ chances to obtain flexible payment terms in the future, providing a cash flow boost which opens up investment options.
Communication is key
There are many ups and downs during the business’ lifecycle and at some point the company might find itself in financial difficulties, but this does not necessarily have to negatively affect supplier relationships. If a business is struggling to make payments on time, effective communication is key. The procurement partners should be made aware of the business’ position so an alternative payment date can be suggested in order to safeguard supply continuity and prevent creditor action.
Another advantage of putting effort into building a supplier relationship based on trust and transparency, is the power of negotiation to help secure better deals, such as discounts for early payment which allows sellers to enjoy the benefits of ordering in bulk.
Respect goes a long way
Eventually, it all comes down to ‘respect’. To create a profitable and mutually-beneficial supplier relationship with increased chances of maintaining a healthy cash position and efficiency and profitability growth, it is key for owner-managers to put themselves in the other party’s shoes.