Managing Your Supplier Base

Finding the Right Supplier

The right supplier base can make or break a business, of any size, particularly in the current climate with inflation rising at a rate unseen for a generation, and cost of living the byword on everyone’s lips.

It is especially tempting in this environment to assess your suppliers on a cost only basis. While this certainly should be one of the key factors used in assessing your supplier base, it certainly shouldn’t be the only factor.

Instead, every supplier should be considered a partner to your business. A person, or company, who is helping your business to meet your customer’s needs and your own expectations for the business. You should be approaching engaging a supplier in the same way you would hiring an employee. While the salary banding for a particular hire is often set before the process begins, it’s not salary demand that will have the final say in an interview process, nor should cost be the be-all and end-all in a tender process.

You need suppliers that match your approach business, match your business ethics, understand your needs as a customer and look to support your business, not just make money out of it.

Maintaining Relationships

Once you’ve established who your supplier will be, whether through a tender process or direct conversation, it’s important to ensure you maintain a relationship with the supplier. Any benefit gained by having the right supplier in place will soon be lost if your relationship deteriorates to a transactional invoice sending basis.

Of course, I’m not suggesting that you need to be going out for drinks with every supplier every week. Rather you should have at least one person at your company who would be happy to pick up the phone to at least one person at the supplier with no agenda other than having a catch up. And you should try to ensure that they do so.

This personal relationship can be maintained at any level of the business, it doesn’t need to be the owner or CEO who maintains every relationship. Frankly, they’re likely to have other things to worry about.

Instead these relationships should be maintained at the appropriate level, your office manager might maintain excellent relationships with the stationery supplier and cleaning company, but would not be the right contact for the supplier of your accountancy software.

Reviewing and Updating

One thing that every company I’ve ever worked at has been guilty of is complacency when it comes to their supplier base. Some companies have even had an excellent procurement process, going through all the correct steps in identifying and engaging a supplier, but once the supplier was contracted, that was the end of the process. They tended to remain the default supplier of that side of the business until a serious problem caused change.

A much better behavioural practice for companies to engage in is a constant rolling review of their supplier base.

I’m not suggesting that every single supplier of goods or services to the business should be given only annual contracts and at the end of each term, a full tender process should take place. While the procurement managers among you might be salivating at the prospect, this risks undermining the relationships you have with suppliers, and certainly won’t make suppliers feel like partners in your business.

Instead, suppliers should be regularly reviewed for ongoing suitability. Have the needs of your business changed? Has the supplier changed the focus of their offering? Has the entire supply been disrupted by a new and better model? There could be many reasons to change, but it should not be done just for the sake of it. First, evaluate your existing customer’s against the current needs of your business, then discuss any shortcomings with the supplier, whether on service or price, offer them a chance to maintain their status as your partner first. Only once that option seems unlikely, should you then consider going back to stage one and engaging on the open market.

Simplifying the Process

One very easy way to simplify the process is to reduce the breadth of your supplier base. Rather than having separate suppliers for every business need, you could instead consider having a few key consolidated suppliers to make the partnership model of supply more viable.

A prime example of this working in “the real world” are the operating model of Facilities Management companies. Rather than engaging a separate cleaning company, security company, catering company, pest control company and maintenance company you could instead engage a single Facilities Management company to operate all of those functions for you. This FM company may not be the best or the cheapest option at any single avenue of supply, but considered as a whole they will partner with you to provide a much better service overall.

Cardinal Arrakis provides this partnership role to small businesses. We maintain a much larger supplier base, and all the time consuming relationships, tendering processes and cost benefit analyses so that small businesses can focus on delivering their own USP, safe in the knowledge that their partners at Cardinal Arrakis will manage their supply chain on their behalf. Leaving them only one partner to maintain a relationship with, and only one invoice to pay at the end of the month!