Regarding the soft skills requirements, the difference between the job description for sales and supplier relations departments is entirely irrelevant. It is because it is enough to take a holistic approach to notice that we always have similar processes in the background.
Most of the production companies engaged in the distribution have both procurement and sales departments. In this case, technical skills are necessary if the company strives to achieve excellence in production. However, real success in supplier relations comes to those who master soft skills.
On the other hand, sales departments get better results if they learn about the product and perform strategic buyer analysis. Thereby, the procurement staff needs a sales mindset, while sales staff need an analytical approach.
As these sectors are within the same company, can they learn from each other? Is it possible that both follow the same principles but with different agendas? In other words, is there a difference between a key account and supplier relations?
Supplier Relations
McKinsey consultant Peter Kraljic was calling for a more proactive approach in supply management back in 1983. As a founder of SRM (Supplier Relationship Management), Peter Kraljic shed light on the improvements in supplier relations.
Seemingly, the essential part of Supplier Relationship Management lies in acknowledging that no supplier is the same. Similar to the custom approach to any strategic buyer, there is no universal approach or strategy for all suppliers.
The point often overlooked by companies is an insight into the needs of their suppliers. As they tend to justify the tedious approach to customer needs, the supplier relations get neglected.
However, building supplier relations is of the utmost importance in times of resource scarcity. For example, during a natural disaster, a shortage of supply of materials, even food, might occur. In these cases, those who have a long-term collaboration with suppliers will have fewer consequences.
However, the process of building supplier relations is the harder part. It is because it takes perseverance, diligence, and soft skills. In reality, only a few people in the sales department have these skills.
The Usable Practices of Key Account Management
Seemingly, the most advanced sales professionals are those in the Key Account Management (KAM) department. It is because dealing with the strategic buyer requires professional skills.
Therefore, embracing the practices of this department can serve in improving supplier relations.
Know Your Strategic Buyer / Supplier
As preparation is the first step in any sales process, a procurement officer needs to know as much as possible about the most significant suppliers.
If possible, engaging in communication with any of their employees is also desirable. Equally important to the official information is what the blue-collar employees have to say about the company culture.
It is because getting to know the culture enables better adjustment to it. Not to mention the ability to transfer the positive examples to your own company.
On the positive side of supplier relations is the ability to enhance communication and understanding. Different from the usual vendor negotiations, the transparent approach always brings fruitful results.
Long-Term Collaborations Over Short-term Gains
For most cases, the negotiations focus is on the rebate that depends on the quantity. In the case of the new contract, sales representatives will offer the discount by estimating future purchases.
For an illustration, the history of previous purchases, or the size of the business helps to make projections. Of course, a plethora of factors can influence the outcome of any collaboration.
If the estimates are lower than the yearly purchase, an offered discount might not be competitive. On the other hand, a higher rebate could lead to a chain effect of justifying more concessions to the rest of your competitors.
As building relations is a foundation for better negotiations with a strategic buyer, their success rate will improve. Keeping in mind the sales process of their suppliers, the supplier relations department can collaborate on making sales plans. Furthermore, work the way towards making the sales estimates a reality. Therefore, mutual collaboration could overcome short-term gain for one of the sides.
Tailor-Made Solutions for the Strategic Buyer / Supplier
One of the best KAM practices is the “tailor-made” solution for the strategic buyer. Similarly, when you know your suppliers and have long-term benefits in mind, you can come up with those. An example is redefining the delivery time that leads to supplier cost reduction.
When both sides analyze the circumstances, the solutions emerge. Sometimes the answers will rise from everyday communication. As supplier relations improve, the number of interactions improves, too.
Nowadays, communication means instant exchange of information and data. Sometimes contracts define the usage and transfers of data. For example, Electronic Data Interchange (EDI) is more of a strategic buyer agreement than it is a strictly defined process between two sides. In this case, EDI means the natural flow of documentation and transparency in the process.
Consequently, adjusting and including software in supplier relations is more of a necessity than it is an option. When both sides have improvements as their objective, the results are not lacking.
Improvements in Supplier Relations
There is no significant difference between SRM and KAM as both rely on the principles of building relationships. Moreover, a deep understanding of your counterparts leads to a fruitful collaboration.
However, this is a painstaking task that requires time and energy. In addition to repetitive work and detailed analysis, most procurement professionals don’t have time for it. Therefore, the automatization of some of the tasks is of utmost importance.
One of these automatizations is the contract management software that handles administrative tasks and reduces overhead. In this case, there would be much more time for relations building and getting to know your suppliers.
Finally, this focus on improving supplier relations will improve overall company efficiency. Nourishing the climate of collaboration and support between sectors may result in the long-term benefits for the company.
