Question

The typical owner–operator will accept suppliers’ delivery and ordering procedures. What is the primary reason he or she would not try to change them?

Answer 1

Because it helps to build strong business relationships with your suppliers, through good negotiation, collaboration, management and performance review skills.

Get quality service from your suppliers

Building good relationships with suppliers

How you can help your key suppliers

Use technology to improve efficiency

Service level agreements

Review your suppliers' performance

Ending supplier contracts

Finding a reliable and competitively-priced supplier is vital to the success of your business.

The terms that you negotiate with your supplier need to be based on:

the way that you pay them – bank draft, commercial bill paid for by bank, foreign currency

potential costs - administration, taxation, transport, general payments and transactions

possible risks - late payment to supplier, or faulty, late or undelivered goods.

To ensure a productive working relationship, select suppliers who offer a quality service and meet your specific needs.

Quality service

There are a number of national and international certification bodies that enable you to check the quality of a potential supplier.

Specific needs

Choose suppliers who can meet your specific needs. For example, if faster turnaround is a priority for you, then there is no point in selecting on grounds of cost if the turnaround requirements cannot be met.

Suppliers warrant careful attention, as their performance may be crucial to your business.

Here are some ways that you can help your key suppliers:

Co-ordinate your production schedule with theirs.

Discuss ways to reduce overall costs through size or timing of orders/contracts.

Consider additional products or services that your supplier could provide.

Update them on strategic changes or new products early on - this helps them adapt to meet those changes.

Analyse how well you forecast sales and plan to meet your supply needs. Sharing the results of this analysis with your suppliers will allow you to develop accurate sales plans and hone shared sales forecasts and schedules.

Use a purchase order system to control and monitor the buying of goods and services from suppliers .

Enter a keyword

Manage your suppliers

A supplier is defined as the person or organisation that provides a product or service to another business.

Finding a reliable and competitively-priced supplier is vital to the success of your business.

The terms that you negotiate with your supplier need to be based on:

the way that you pay them – bank draft, commercial bill paid for by bank, foreign currency

potential costs - administration, taxation, transport, general payments and transactions

possible risks - late payment to supplier, or faulty, late or undelivered goods

This guide explains how to build strong business relationships with your suppliers, through good negotiation, collaboration, management and performance review skills.

Get quality service from your suppliers

Building good relationships with suppliers

How you can help your key suppliers

Use technology to improve efficiency

Service level agreements

Review your suppliers' performance

Ending supplier contracts

Get quality service from your suppliers

To ensure a productive working relationship, select suppliers who offer a quality service and meet your specific needs.

Quality service

There are a number of national and international certification bodies that enable you to check the quality of a potential supplier.

Specific needs

Choose suppliers who can meet your specific needs. For example, if faster turnaround is a priority for you, then there is no point in selecting on grounds of cost if the turnaround requirements cannot be met

target and specify performance standards that help to define and secure your business/supplier relationship. In most cases it will determine the major responsibilities of the business/supplier trading relationship. It will generally cover such issues as problem management, compensation, warranties and remedies, resolution of disputes and legal compliance. It can also be extremely useful if legal proceedings ensue.

Building good relationships with suppliers

It pays to invest time in building good relationships with your key suppliers. If you can save money or improve the quality of the goods or services you buy from your suppliers, your business stands to gain.

Hints on dealing with your suppliers

Consider some of the following when working with your suppliers:

Meet your contacts face-to-face and see how their business operates. Understanding how your supplier works gives you a better sense of how it can benefit your business.

Meet the people who'll be managing your account and make sure they can be easily contacted.

Ask about their plans for development or expansion. Will this affect the goods or services they're providing to you?

Help your suppliers by placing orders in good time, being clear about deadlines and paying on time. See the page in this guide on how you can help your key suppliers.

Keep an eye open for any opportunities you can pass their way -in a good customer-supplier relationship they'll do the same for you.

Make your business important to your suppliers and they will work harder for you. Some suppliers may offer better deals if you promise to use them exclusively.

However this may cause significant problems if they go out of business.

Don't ignore opportunities offered elsewhere. Keep your options open by monitoring the deals offered by other suppliers.

Consider whether a contract or a service level agreement (SLA) is necessary. This process will guard against complacency on the part of the supplier. See the page in this guide on service level agreements.

How you can help your key suppliers

It is in everyone's interests that you do well out of key supplier relationships. Suppliers warrant careful attention, as their performance may be crucial to your business.

Here are some ways that you can help your key suppliers:

Co-ordinate your production schedule with theirs.

Discuss ways to reduce overall costs through size or timing of orders/contracts.

Consider additional products or services that your supplier could provide.

Update them on strategic changes or new products early on - this helps them adapt to meet those changes.

Analyse how well you forecast sales and plan to meet your supply needs. Sharing the results of this analysis with your suppliers will allow you to develop accurate sales plans and hone shared sales forecasts and schedules.

Use a purchase order system to control and monitor the buying of goods and services from suppliers - this facilitates internal financial controls and prevents specification misunderstandings at the supplier's end. See our guide on stock control and inventory.

Pay bills promptly. Paying late will strain your relationship with the supplier and could lead to less favourable terms in future. Ideally you should have a payment policy that commits your business to paying undisputed bills on time - a copy should be sent to your suppliers.

There are many ways in which technology - especially Internet-based communications - can help you develop and maintain a good relationship with your suppliers.

Use technology to improve efficiency

A high speed Internet connection such as broadband will allow you to collaborate more closely with your suppliers through sharing plans, forecasts and consumer data.

Sharing such information with your suppliers makes it easier for you to:

analyse real-time information about sales, orders or market trends

forecast and react quickly to changes in demand

improve efficiency - accurate information on stock means you will only order the supplies you need

E-collaboration with your suppliers, such as using email and sharing spreadsheets, can be simple, but the greatest benefits come from sharing information in "real time". This requires more sophisticated technology, such as the following:

Inventory planning or forecasting systems - use your inventory records to forecast the market demand for your product.

Online analytical processing systems - analyse past sales performances and compare the forecasts from different suppliers.

Enterprise resource planning (ERP) systems - can plan and schedule your entire business. By connecting your order and purchasing system with that of your suppliers, orders can automatically be placed and tracked and the supplier will automatically issue an invoice.