Building and prioritising strong relationships with suppliers is crucial for ensuring a reliable supply chain, achieving cost efficiencies, and fostering innovation.
Paige West spoke with Jozef Jarábek, Head of Procurement, SOS electronic about its main strategies to ensure these relationships are robust and long lasting.
Here are Jarábek’s top strategies:
- Communication and transparency: maintain consistent and open communication channels. Perform regular updates and meetings and share relevant information such as forecasts, changes in demand, and potential challenges
- Mutual trust and respect: be honest about your expectations and any issues that arise
- Collaboration and joint planning: collaborate on product development and improvement projects as this can lead to better products and innovative solutions. Involve suppliers in strategic planning sessions, their insights can add significant value to your planning process
- Fair and timely payments: agree on fair payment terms that work for both parties. Ensure that payments are made on time to build trust and demonstrate reliability
- Performance monitoring and feedback: establish Key Performance Indicators (KPIs) to measure supplier performance. Conduct regular performance reviews and provide constructive feedback
- Long-term contracts and stability: where feasible, enter into long term contracts as this provides stability and predictability for both parties
- Technology and integration: utilise technology to streamline processes and improve efficiency. Shared platforms for inventory management, order processing, and communication can be
beneficial
By implementing these strategies, we are able to build and maintain strong, long-lasting relationships with our suppliers, ensuring a stable and efficient supply chain that benefits both parties.
Measuring the success
Measuring the success of supplier relationships involves evaluating various aspects of performance, collaboration, and reliability. For us, the Key Performance Indicators (KPIs) are essential metrics which help in this assessment. The most important KPIs are Quality metrics where we are watching the number of defective items per batch or shipment. Also information about the percentage of products returned due to quality issues. Delivery performance is the second KPI and we need to know the percentage of orders delivered on or before the agreed date. Time taken from the order placement to delivery is also important. With cost metrics, we are to compare supplier costs against market prices and other suppliers.
Each supplier is trying to save cost and to be as effective as possible so saving through negotiations or other cost-reduction is also important. Response time, support quality and flexibility are KPIs which belong to service and cooperation as such. Our effort is to collect as much data as possible and then to evaluate this data according to the set KPIs and if there is room for improvement somewhere, to look for solutions in cooperation with our partners. By focusing on these strategies and KPIs, businesses can effectively measure and manage supplier relationships, ensuring reliability and fostering collaboration for mutual benefit.
Sustainable and ethical practices
It’s also important for us to ensure suppliers adhere to sustainable and ethical practices. This involves a multifaceted approach that includes clear expectations, monitoring, collaboration, and continuous improvement. The Code of Conduct outlines expectations for labour practices and ethical behaviour.
We require our suppliers to have certifications like ISO or fair trade for ethical sourcing. We also conduct scheduled audits to ensure constantly outgoing compliance and we are also using third-party audits to provide unbiased assessments. But probably the most important for us is continuous improvement, which consists of regular reviews of supplier performance, practices, adjusting standards, and policies as needed. In response to global supply chain challenges, particularly those highlighted by the COVID-19 pandemic, we have adapted our approach to supplier relationship management in several key ways to enhance resilience and flexibility.
These adaptations include:
- Diversification of supplier base: expanding our supply chain to avoid reliance on a single source or region
- Digital and technology integration: we implemented technologies like artificial intelligence (AI) and machine learning (ML) to enhance supply chain visibility and predict potential disruptions. These technologies help us in real- time monitoring and predictive analytics, allowing for quicker response times
- Collaboration and strategic partnerships: to be closer with our key suppliers to ensure mutual support during crises
- Flexible contracting and agile procurement practices: quicker decision-making and adaptability to changing circumstances
- Inventory management and buffer stock: we maintain higher levels of buffer stock or safety inventory for critical components to cushion against supply chain shocks
We hope that these mentioned points will help us build more resilient and flexible supply chains and be better equipped to handle the uncertainties and challenges posed by global disruptions like the COVID-19 pandemic.
SOS electronic is an international distributor of electronic components tailored for industrial production, with a particular focus on verified global brands that emphasise design-in solutions.
This article originally appeared in the September issue of Procurement Pro.
