12 steps to more effective supplier relationships
By William Atkinson -- Purchasing, 5/8/2008 2:00:00 AM
Honesty is the best policy—for supplier management. At least, that’s the thinking of Patrick Bliss, director of purchasing for educational programs and services firm Apollo Group in Phoenix. If you offer trust and loyalty to your suppliers, you can expect the same in return, Bliss says.
“Over the last three years, one of the things we have really focused on has been improving supplier relationships with communication,” says Bliss. “This has helped us build some very strong supplier trust loyalties, which have helped our organization with spend management.”
With that in mind, Bliss recently offered Purchasing his 12 tips to better supplier relationships.
1 Be honest in your communication. The first and foremost key for Apollo is honesty. “I am a big proponent of this, as is everyone on my team,” he emphasizes. “You can’t build trust and loyalty with suppliers without honesty and that starts internally.”
Apollo has found that, when it is honest with suppliers, they, in turn, are honest with Apollo. “We have some borderline honesty issues with a few suppliers, but we know that, when our key suppliers come in, they will be telling us the real deal,” he states. “This saves everyone a lot of time having to filter through the 'muck and mire’ that often occurs in supplier communications, and it also saves us a lot of money on our overhead costs.”
2 Do your homework. Apollo conducts extensive research on suppliers before getting involved to establish a supplier’s openness and communication strategies. For the strategy of honesty to work, it takes a certain kind of supplier. By putting in more work up front, Apollo enjoys a good success rate building relationships, because it knows in advance whether honesty and trust are as important to the suppliers as they are to Apollo.
3 Make the local connection. Apollo looks for local representation from suppliers as often as possible to improve the relationship. “Having a close local connection helps to build communication, trust, and loyalty,” he explains.
4 Road trip. When local representation isn’t possible, Apollo schedules regular site visits. This involves not only having supplier representatives visit Apollo, but also visiting suppliers. “It isn’t fair to expect suppliers to incur all the costs of visiting us, so we arrange to visit them,” he explains. “This also helps us get to know the people there and learn more about their operations.” Bliss has found that, whether suppliers are visiting Apollo, or his team is visiting suppliers, the meetings provide “face time,” which is very conducive to building trust and loyalty.
5 Be honest in the bidding process. While some buyers feel the “game” of negotiating blurs the honesty line, Bliss says when his company goes out for bid, it is very honest and complete with its information. “We also allow fair inquiries from our suppliers,” he adds. “We try not to hold back information.” The only information it may hold back would be information that is very confidential to Apollo or another of its suppliers.
6 Pace yourself. Bliss has found that creating honesty and openness is a growth process. Apollo tries from the beginning to be as honest as possible, but it understands that, going into a new relationship, it is not always going to be immediately reciprocated. In the early stages, Apollo documents everything its new supplier says and then tracks it, to make sure that what the supplier says is truly the way things are, especially with regards to stated commitments. “If we see that the supplier gets into the habit of doing what it says, this lets us open up to the supplier even more,” Bliss says.
7 Share those forecasts. Open and accurate forecasts are also important. “We try to stay up-front with our initiatives and what our intent is,” he explains. Being a service organization, forecasting is different for Apollo than it would be for a manufacturing organization. It doesn’t have to try to forecast requirements for raw materials based on a projected production schedule (although it does have MRO purchases). But it needs to accurately forecast its requirements for the next year in a number of key indirect and services spend areas. “We have found we can build trust and loyalty with suppliers by being 'spot on’ with these forecasts,” he states. “That is, suppliers have learned that they can trust our forecasts.”
8 Provide timely feedback. Apollo is committed to providing timely and honest feedback to suppliers, whether it is positive or negative. “When things are good, we will be the first to give praise to our suppliers,” Bliss says. “When things are not going well, we will be the first to step forward and discuss the problems, and we don’t sugar-coat things.” Rather, communication will be along the lines of: “Here are the issues, and we need to get them resolved.” Apollo is also always improving its supplier evaluation forms, so it can provide better feedback to them in terms of its expectations and how well suppliers are meeting those expectations.
9 Solicit timely feedback. Conversely, Apollo encourages its suppliers to provide their own honest feedback to Apollo, good or bad. “We want suppliers to let us know if they have problems with us,” states Bliss. “For example, we may meet in a stewardship meeting, and a supplier will say, 'Here is what you said six months ago, and here is what we are doing as a result.’ If we are off, we need to know that as well.”
10 Know when to say when. Bliss says one of the key components of this strategy is to know when it isn’t working. If, despite its best efforts to build mutual trust and loyalty with a supplier, a relationship isn’t working due to a mismatch in communication or openness, Bliss says a company has to know when to sever ties. “We have had a few instances where we needed to terminate relationships with suppliers due to problems with honesty, trust, and communication and we did.”
11 Bend, don’t break. Another key, according to Bliss, is to allow for some flexibility. No two organizations are alike, so no two supplier relationships will be alike. “For example, you may get certain levels of loyalty from one supplier, and get exactly what you need,” he points out. “On the other hand, you may get the same level of loyalty from another supplier that doesn’t provide as much information.”
12 Trust your instincts. Finally—and Bliss considers this to be a simple but vitally important key—when it comes to building trust and loyalty with suppliers, rely on your intuition and experience.
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