The buyer-supplier relationship often becomes strained because so much rides on performance and smooth order processing. As a buyer, the development, production, and delivery of a product are completely dependent on suppliers, and one of the biggest challenges to the buyer-supplier relationship is failure in communication.
In many organizations, procurement teams use multiple platforms to communicate with suppliers. This includes email, phone calls, spreadsheets, texts, and even fax. While businesses can function this way, it increases the chance that things will be missed, from missed PO acknowledgments to inaccurate delivery dates or mismatched invoices. Every issue with a PO, AP, or RFQ puts the buyer-supplier relationship at risk and can lead to costly problems throughout your business.
This is incredibly important across organizations of all types and sizes. For example, in 2018, The Economist Intelligence Unit conducted a survey to understand the negative effects of poor communication in the workplace. Fifty two percent of respondents said that poor communication added significant stress to their workday and 44 percent said that a lack of clear communication led to delays or failure to complete projects. In the worst examples, 18 percent revealed that they had lost sales due to ineffective communication.
Applying this learning to manufacturing organizations and their suppliers reveals some particular communication challenges:
Missed Purchase Orders
In the short-term, missed orders mean having to pay for expedited shipping or an expedited rush fee to the supplier. After paying for last-minute transportation costs, the buyer is left with thinner profit margins and stuck spending cash that no business can afford to throw away. In the long-term, missed purchase orders can also have a damaging effect on customer reputation.
Changes to Purchase Orders
POs are in flux until an order is delivered. Buyers and suppliers constantly change details like quantity, price and delivery date on purchase orders. It’s vital, therefore, that ERP data is accurate so corresponding adjustments can be made to production schedules. Manufacturers should be able to quickly capture changes with suppliers and update their ERP systems.
Real-time communication over quality issues with suppliers is critical to keep rejected materials out of the inventory. And supplier quality issues can damage customer trust if orders are impacted. Knowing a supplier’s quality ratings, timeliness, responsiveness, and price variances are key data points that can help when comparing RFQs and choosing a supplier to work with.
Problems with the buyer-supplier relationship can frustrate employees. When orders are missed, production schedules are thrown off, and as a result, management adjusts work schedules to account for periods of decreased productivity while waiting for a missing delivery. The disruption in employee work schedules creates stress and can lead to higher employee turnover. It’s no wonder that employee frustration has been dubbed ‘the silent killer of productivity.’
With all of this in mind, there are three ways in which manufacturing organizations can significantly improve these processes:
Building a relationship with a supplier may not involve much face time, but it should always involve collaboration. Managing purchase orders, accounts payable, and RFQs across multiple platforms makes the supply chain vulnerable. With the introduction cloud-based and SaaS technology, collaboration solutions that seamlessly connect buyers and suppliers in a single platform, where all interactions are archived in real-time and available for both parties to see, are now readily available to the masses with reasonable price tags.
With these advancements, both buyers and suppliers can track every part of the PO process and better communicate to help ensure nothing gets missed.
For effective collaboration between buyers and suppliers, suppliers also have to commit to leveraging updated solutions. Ideally, buyers pay for the software license, and suppliers can then access the software for free. The benefit of this model for suppliers is that it streamlines labor-intensive tasks, quickly acknowledge POs, and ultimately allows suppliers to get paid faster.
Suppliers care about their service and want to know how they’re doing. Being able to evaluate and score suppliers on their performance creates an open and effective communication channel to quickly relay the good and the bad, helping everyone improve collaboration and performance.
Improving supplier relationships starts with building better communication processes, and this depends on using the right tools designed specifically for the job. Done well, it can help foster highly-collaborative, accurate and positive partnerships that have a strong impact for all stakeholders.
Tom Kieley is CEO at SourceDay, a collaboration engine that brings people, information, and processes together to modernize how companies manage orders with their suppliers, drive collaboration and ship orders on time. Tom is a veteran business owner with more than a decade of experience in product management and operations, hardware and software sales, and supply chain management.