The disruptive events of the past year have alerted many procurement teams to major weaknesses in their supply chains.
Following the outbreak of COVID-19, just-in-time (JIT) supply chains across the globe struggled to hold up under the pressures of consumer stockpiling, changing demands, border and factory closures, and shipping delays. Now, in the wake of the pandemic, some organisations will likely shift to a just-in-case (JIC) model to mitigate against future disruptions while others will favour re-shoring or near-shoring some of their production.
Another key component of procurement’s post-coronavirus recovery is nurturing and strengthening supplier relationships. In recent months, many teams have learnt the hard way that the absence of meaningful supplier relationships (and ultimately a lack of supplier loyalty) does not serve them well during a time of crisis.
Procurement teams must stop taking their supplier relationships for granted and instead work to actively future-proof them. Here are three ways to do just that.
1. Implement efficient on-boarding procedures and flexible payment terms
When you demonstrate compassion and understanding for your suppliers, loyalty and trust will surely follow.
For many small vendors, rigid payment terms and complex on-boarding processes are discouraging at best and unworkable at worst. Listen to your supplier’s needs and strive to be accommodating. Who knows – the fifteen-day payment cycle you approved last year could be a factor in keeping a critical supplier afloat during disruptive times, and that loyalty will be repaid.
2. Allocate SRM roles within your team
Are there people within your procurement team that are actively committed to SRM?
To drive value and innovation via your supply chain, you need to be actively collaborating with your supply base. That means identifying the relationships most in need of cultivation and investing the time to do so.
This could include more regular check-ins, site visits, and a greater commitment to getting to know your vendors personally. Ultimately, you should be asking yourself, “will this supplier support me and protect my interests in the event of a crisis?” If the answer is no, you’ve got some work to do.
3. Consider the benefits of outcome-based contracts
Moving away from traditional procurement contracts will see both parties sharing in the risks and rewards and enable them to approach negotiations collaboratively.
An outcome-based contract will see both the buyer and vendor committed to, and invested in, the other’s success. Not only will this improve supplier reliability and efficiency, but the services and products purchased will be delivered to a higher standard and the total cost of ownership will decrease.
A note on single sourcing
Are you single-sourcing any critical components, products, or services?
No matter how fantastic your relationship with a particular supplier, it is never acceptable to be entirely dependent on them. Supplier consolidation is important, but not to the extent that it exposes your organisation to increased risk. Be sure to have contingency strategies in place and work on fostering meaningful relationships with all of your critical suppliers.
Join PASA Connect Today
On 14th April, the PASA Connect team is hosting a virtual roundtable, “Futureproofing your key supplier relationships,” which will be facilitated by Dr. Sara Cullen.
To find out more visit the PASA Connect website or contact Jonathan Dutton via Jonathan Dutton at email@example.com m +61 (0)404 452 861.