How important are strong supplier relationships in the manufacturing sector?

How important are strong supplier relationships in the manufacturing sector?

In today’s fast-paced industry environment, businesses continually strive to maintain their competitive advantage and remain leaders in their chosen field.

They’ll take any steps they can take to improve their productivity and efficiency.

This is extremely true within the manufacturing sector with several factors playing a key role in the overall business effectiveness – the cost of raw materials, the quality of finished products, and the strength of supplier relationships to name but a few.

In fact, very often these supplier relationships are what define business success.

At its most basic level, a business requires suppliers to provide resources for the products or services it sells, as well as resources to run the company itself.

Having strong, reciprocal supplier relationships will create added value for your company.

The better you know your suppliers and they know you, the more likely you are to receive personalised service, discounted prices, and uniquely beneficial terms. Your supply chain will become more efficient, cost-effective, and productive as a result.

Kirstie Penk is a director with The Legal Director (TLD) which provides ambitious SMEs with experienced in-house counsel on a part-time, retained basis.

Manufacturing Matters asked Kirstie for her views on how best to manage key supplier relationships.

She said: “It’s never a bad thing to think about who your suppliers are and in particular, who are the key ones.

“You should start small, so you don’t become fazed by this process. Don’t get overwhelmed thinking you’ve got 50 suppliers to consider and that’s too big a task. Maybe look at the ones who you get 80% of your products from or who count towards a large part of your revenue.

Pick your top three or four and then spend some time doing background research checking what sort of terms you’ve got with them.

Director at TLD Kirstie Penk

“It won’t always be the obvious people. It might be the people who supply the IT for your office. It might be the cleaners. In fact, it could be anything – not necessarily involved with the manufacturing process.”

Kirstie added: “When you’ve then got a handle on what the terms look like, it’s always a useful exercise to think about what it is you’re getting from them, what are the key terms from your point of view, and then check all this against what you’ve actually got documented.

“More often than not there’ll be discrepancies. For example, with returns you may have agreed verbally that you’ve got 90 days, but the contact might state only 30 days. Its worth thinking – is this sufficiently important to use – should we have formalising our verbal agreements?”

Kirstie concluded: “I’d always recommend doing thorough due diligence on your suppliers at the start of any new relationship.

“Even if this means going through a bit of pain at the start, having everything clear will make things much easier later. Think about which bits are most important to you, which bits you’re going to dig your heels in on and require and what bits of the agreement you can live with. Everyone hopes that when you sign a contract it can then go in a drawer and never be looked at again. However its worth taking the time at the start and at key points in your relationship to ensure that if there is an issue and you need to get the agreement out of the drawer again – it covers the terms that are key to you and your business”.