How To Maintain Good Relationship with Suppliers

How to maintain good relationship with suppliers is a question every buyer or purchasing organization should strive to find an answer to since it is my belief that any serious organization doesn’t want supply interruption as result of bad relationship.

Supplier may find a buying organization to be attractive based on the value the organization brings to it and the general attractiveness of the organization which we will explore in detail.

What you need to know as a buyer

Most buyers tend to assume that since they are paying then they must be very important to the supplier. There is some degree of truth in this but it mostly just comes down to your bargaining position as a buyer. 

While a buying organization may find it desirable to leverage or even coerce a supplier into a deal, or even get into a long-term relationship with a supplier BUT:

1. how does the supplier look at the relationship?
2. Is the buyer’s business sufficiently important for the supplier to make a concession?
3. Will the supplier want or accept the buyer as a long-term customer or partner?

These are some of the questions a supplier is considering and using such to develop their quadrant to insert buyers, basically their preference model.

The supplier preference model: where do you lie?

While there are a number of ways a supplier may evaluate a buyer, one of the most common method is looking at the buyer in terms of how attractive their organisation is to do business with and the value of the buyer’s business.

Here is how it works

Looking at each quadrant in turn;

• Nuisance customers

Being in this quadrant will mean that as far as the supplier is concerned your business is neither attractive nor valuable to them.

Supplier practicing customer relationship management will regularly review their customer base and downgrade or cease service to unprofitable customer or raise their prices. The idea behind raising the price is basically to turn such into exploitable customers.

• Exploitable customers

In this category the supplier will put buyers who tend to offer large volumes of business, which in turn compensates for their lack of attractiveness, because as far as the supplier is concerned the buyer or buying organization is still not attractive to do business with.

The supplier will fulfil the terms of the supply contract but will not go out of its way to provide extras and any extras demanded will be charged as additional cost

• Development customers

This is one of the two quadrants you want to be in. The customers who fall in this category are attractive to the supplier, despite their low level of business.

You may wonder why this is so, but the supplier may see the potential to grow the account, and may court extra business by ‘going out the extra mile’ in fulfilling contracts.

If all goes well such customers may be converted into core customers

• Core Customers

These customers are highly desirable and valuable for suppliers, who will want to establish long-term, mutually-profitable relationship with them if possible.

This is the starting point as a buyer to understand how to maintain good relationship with suppliers and why you need to do it because you don’t want to be in the nuisance and exploitable quadrants  

Factors that will make a supplier keen to do business with a buyer

Regarding how to maintain good Relationship with Suppliers, as a buying organization you need to consider what factors that will make a supplier keen to do business with you.

Some of the factors and what you can do will include;

1. Having a good reputation and good standing in the market will make you beneficial to do business with e.g., things like environmental or ethical leadership
2. Fair, ethical and professional trading practices such as, paying suppliers promptly, not entering into unnecessary disputes, keeping suppliers well informed, not squeezing profit margins excessively, will definitely put you in supplier’s good books.
3. Trust, arising from reliable follow-through on representation and commitment made in negotiation and post-contractual dealings is a good way to maintain the relationship
4. Willingness to share risks, cost and value gains equitably with supply partners, things like, seeking reciprocity or win-win, not making excessive demands and hard bargaining techniques, without offering any benefits or concession in return
5. Constructive interpersonal relationship with negotiators and contracts at the buying firm is also something to think about.