Working with major Suppliers

Two ways to strengthen your business relationships with your major suppliers.

In today’s business environment a substantial portion of all components required for goods to be manufactured is actually sourced and obtained from other companies. That means that a manufacturer is considered and defined as a first-rate manufacturer by the quality of the components, materials or semi-finished products he obtains from various external sources – his suppliers.

The increase of the rate by which companies acquire parts, materials, components or semi-finished products outside the company is also affecting and changing the relationship between manufacturers and suppliers.

In the context of this manufacturer – supplier affiliation and for both parties to be able to secure competitive advantages, a closer collaboration between them will ensure the victory in business warfare.

Here I propose two ways for a manufacturer to improve business relationships with his major suppliers.

1.  Aim to improve the manufacturer - supplier relationship:

Develop strong, long-term relationships with your suppliers in order to work closely with them and to better design various processes, components, parts, products and/or services.

Aim to improve the relationship by converting your suppliers to long-term partners.

Companies must form partnerships with their major suppliers and exhibit a high level of trust in them in their process of producing the highest quality products.

In today’s automated environment where most manufacturers have been operating, the aim of lower costs is not the only priority anymore.

Long-term service is another important factor ...

The Supply Chain must also be seen as a service instead of a manufacturing function only.    

Encourage your suppliers to intensify their efforts of investing in new advanced techniques and support them with upgraded machinery equipment or assist them in seeking financial support from banking institutions.

Let’s analyse these two major points here:

a.   Assist your major partners-suppliers to obtain new enhanced manufacturing equipment or upgrade existing ones;

Upgrading your supplier’s machinery equipment enables them to run a smooth and uninterrupted production schedule and to ensure the achievement of lower costs.

Subsequently, you will be getting the benefit of receiving lower cost of all produced components or products. 

b.   Negotiate with or on behalf of your major partners-suppliers with financial institutions;

As a company with respectable business size and profile, you can assist your major suppliers in their discussions with certain financial or banking institutions in their endeavour of obtaining fresh funds to expand their business activities.

Your supplier armed with the support and assistance of your establishment would most probably receive stronger and more attentive attention in their efforts to obtain needed funds to expand their business or in their effort to replace certain aging manufacturing equipment.

A successful effort will for sure assist them in lowering their operational costs and ultimately offer you their components and products at a lower cost.

2.  Establish a good rapport with your suppliers’ suppliers:

Working closely and establishing a good rapport with your suppliers is always advantageous and desirable for establishing a long-term relationship, but that is not the end of it. You must also dedicate time, effort and attention to your suppliers’ suppliers (the second-tier suppliers), who in their turn, have been providing components or raw materials to your suppliers.

Your Supply Chain operations must be extended all the way to include them as well.

Therefore, build and maintain essential business relationships with them and try to provide any needed assistance to them as they, in turn, would provide assistance to your own suppliers.

A close and smooth collaboration with your own suppliers (first-tier) and your suppliers’ suppliers (second-tier) will assist you in identifying any potential weaknesses and/or weak spots throughout your extended Supply Chain operation. An optimally and smooth collaboration with all parties will enable you identify operational gaps and areas requiring improvement.

Working well with them all you will be able to detect any potential issues that occurred in early stages and be able to provide essential solutions before such problems escalate to become major ones.

However, one must also be aware of potential difficulties in forming such relationships, as some suppliers (especially second-tier ones) may be hesitant to share information regarding their operations with third parties, being afraid that such information may be shared with other players in the Supply Chain or being leaked out to their competitors.

As a remedy to such potential objection, you may have to explain and convince all parties involved that such trust and transparency will be needed to maintain the relationship and how you intend to proceed with all received information for the mutual benefit of all.

In essence, establishing strong Supply Chain support teams and providing any required assistance to your entire suppliers’ operating area will enable you to maintain your leading position.

Collaboration in the form of strategic partnerships with your major suppliers will enable you score a victory in the business field!  

Written by Petros N. Zenieris owner of “The Business Criterion” Consulting & Training Office.

A trainer & lecturer ACTA certified with over 30 years of experience from S. E. Asia & W. Africa.

[email protected]