No matter what business your company engages in, maintaining suitable suppliers is key to success. If you have suppliers performing poorly, your business is likely to yield poor results and vice versa.
How Supplier Performance Affects Company Success
There are three main ways in which the performance of suppliers affects company success. Maintaining a good balance of focus on each of them is critical in order to maximize your supplier-client relations.
1. Product Quality
To satisfy your customers and encourage loyalty, you need to supply quality products. In business, it is known that customers are likely to pay more for a product if it is of a good standard. Where will the products come from? Of course, they will come from your suppliers.
If suppliers are providing wrong or poorly produced products, your company’s success is affected. As you lose reputation, customers will have no problem looking for alternatives. These lower sales lead to lower profits.
When your suppliers provide quality products, your reputation is maintained and even strengthened. Rather than seeking alternatives, your customers will refer your company to others so they can also make purchases.
2. Delivery Time
Long order delays and being out of stock are some of the essential factors that negatively affect a company’s performance. These have to do majorly with how prompt your suppliers provide you with products.
Time is money, and no customer wants to waste excess time waiting for their purchases to be delivered more than they should. If their patience is depleted, they could cancel their orders and get their money back. If your customers come to your shop to purchase items and they are unavailable, you might lose them if they manage to get it somewhere else.
All this can be avoided if your suppliers have efficient delivery services, focused on time and quality. You won’t be out of stock, and you can process customer’s orders faster and avoid delays.
3. Selling Price
To make profits, you need to sell your products at a favorable price. The price at which you sell products to your customers is related to the amount you buy from your suppliers as the price is a function of supply and demand. If suppliers sell at high prices, you are likely to sell at a high price and vice versa.
With excellent supplier performance, you can relate very well with your suppliers and purchase products at the best possible price. This is advantageous as it makes the products affordable for the final consumers and puts you in a better position in the competitive industry.
If your suppliers do not supply at reasonable rates, it will be difficult to peg product prices appropriately, and such will be disastrous to your company’s performance.
How to Ensure Good Supplier Performance
Know your suppliers
The first thing you need to know is to become aquatinted with your suppliers, their capabilities, and what you expect from them. Your suppliers should understand what you want and if they are capable of delivering. With this, you will be able to sort out the best suppliers that will perform very well early on.
This might take time and require a bit of hard work on your part, but it will be worth it. In the long run, you will see its effectiveness.
Set your supply requirements and set up good supply policies that are obtainable and realistic. Effective supply policies have been the key to efficient supplier performance for so many companies.
Be a Good Customer
If you want your suppliers to serve you well, you also need to maintain a good customer relationship with them. Suppliers will be discouraged from delivering supplies if your company’s conditions are not favorable to them.
If you place supply orders on time, your suppliers have enough time to prepare and deliver on them. If your orders are always emergencies, suppliers might be forced to turn down the offer if they cannot meet up.
Ensure that you process payments promptly after supplies have been made. Avoid making last-minute order changes when everything has already been finalized. As a company, you should be accountable to your suppliers for them to perform well.
Evaluate Supplier Performance
Keeping track of your supply metrics can help improve supplier success. If your suppliers are performing well or bad, you can only be sure if you evaluate their performance efficiently. This can be achieved using supply management software and applications.
When suppliers put up an excellent performance, you can reward them as a form of encouragement. If the performance is bad, you should communicate with them and tell them where they are slacking. With the metrics derived from the evaluation, you will be able to figure out these areas.
Supplier Selection Best Practices
Years ago, manufacturers based their selection of vendors based on location, price, and flavor. However, with the industries and government’s emphasis on safe and stronger quality food products, selecting the best supplier has become a critical and complex problem for manufacturers. Below we discuss key metrics you must use when selecting your suppliers.
1. Identify vendor options
Before establishing a supplier selection criterion, gather information from various stakeholders such as members of the marketing, research and development, procurement, and accounting departments. Transparent and open communication about the material specification should be established with a pool of suppliers.
2. Evaluate supplier performance before selection
Measuring supplier performance is an important first step before selecting the ideal supplier. Businesses must establish an audit trail or assessment program before signing a supply contract to ensure the vendor does not have any serious quality or system failures or compliance problems that would ultimately affect his or her supply capabilities.
3. Ask for supplier feedback
A self-assessment report or questionnaire is an important tool to gain supplier feedback. The self-assessment questionnaire is critical in identifying supply gaps, and discovering how suppliers understand their operations. In addition to audits and assessments, it is crucial to monitor various informative metrics that add value to the organization or business such as perfect shipments, documentation errors, gaps in supplier selection, and rejected lots.
4. Gaining a satisfied status
A satisfied status is attained after both parties have received a positive performance. Sustained successful performance is a key requirement to gaining satisfied status.
5. Develop a partnership
Successful partnerships facilitate better supplier relationships to ensure the production of high-quality goods. Strategic partnerships help attain the best quality products, at the desired prices, and there’s a better understanding between suppliers and manufacturers.
Suppliers are essential to any company, just like the customers. Excellent performance from them is necessary for a company to succeed. As a company, you should practice good supplier management for you to achieve success. To make everything easy, you can invest in good supplier management software.