Early-Career Advice: What Goes Into Building Supplier Relationships?

Building productive supplier relationships can be difficult under the best of circumstances.  If you’re new to the supply chain space or to a specific commodity area, the difficulty can be magnified. Successful supplier relationships are grounded in trust, and building trust takes time and hard work. 

It’s impossible to interact with suppliers and not make some mistakes, but how do you make fewer of them while simultaneously building strong supplier relationships? 

Critical vs. Transactional Suppliers

First, not all suppliers should be treated equally; supplier segmentation is important. Some suppliers provide products and services that are critical to the business, while others provide more transactional commodities.

Critical suppliers are those in which any supply disruption means loss of revenue. These relationships are paramount, requiring more time and work.

It’s my hope that the following suggestions can help you accelerate your learning curve and do your job more effectively.

Build Alignment

The best personal relationships exist when there is a shared vision, good collaboration and common ground. This, too, is true with your supply base. In my experience, transparency works best in supplier relationships. 

For example, when I worked in supply chain at La-Z-Boy, anytime we had a new product launch, it was incredibly important for the launch to be as flawless as possible. Any mistakes made regarding quality, delivery or performance with a new product can kill the product’s reputation forever.

I learned this lesson the hard way, as I had the unenviable task of dealing with the collateral damage of a poor product launch. I don’t recommend it. 

Early in my career leading our global supply chain, we had a new product launch that was very unique relative to other products in our line. We had never manufactured a product like it before, so we had no prior experience—and neither did our suppliers. 

We had built a successful track record of launching new products, so perhaps we were a bit overconfident. We treated this launch just like any other, but it wasn’t. The fabric was different, the dimensions were unique, the options were different. And it was all new to our suppliers, too.

We made several mistakes, and it took time to recover. As a result of the experience, we learned to involve our suppliers in the conversation at the beginning of the launch process and to have shared metrics and deliverables for all key stakeholders to monitor progress.  All our missteps helped us to build a very robust launch process involving our key suppliers that served us well for years to come. 

Develop Trust and a Willingness to Share Data

Once you align on performance expectations, you want to build a relationship where your supplier helps you. To achieve that, both partners need to have clear expectations of each other.

Lay out, agree upon and document quality specifications, delivery expectations and product specifications well before production begins. The more details you can share about what you expect and how your process works, the better. Information around cost, innovation, promotional lead times—all can be helpful to fill in the bigger picture for your supplier. It’s normal to expect initial experience resistance in information-sharing, both from within your organization and from a supplier not accustomed to transparency, but a few safeguards can alleviate most concern and risk. 

Appropriate supplier vetting and earned trust over time can be a strong predictor of trust and transparency. A non-disclosure agreement can also augment information security for more sensitive projects.

The more information your supplier has about your business with them, and vice versa, the better business decisions you both will make. 

Share KPIs

One method of building alignment across the supply base is to develop shared Key Performance Indicators (KPIs) in significant areas like delivery performance or quality. For example, a delivery agreement to be 95% On-Time, In Full (OTIF) or a quality performance of 1.0 Acceptable Quality Limit (AQL) on shipments—with both supplier and producer having shared ownership—aligns both partners.

Shared KPIs—negotiated collectively based on capability and performance—can reduce the probability of mistakes and help your suppliers focus on what is most important to your business. Where room for flexibility exists, offer options to your suppliers in areas that might not be as critical but helpful to your suppliers.   

Let’s say you have a supplier that needs a bit more time for shipments of a specific product line—and in this case, it won’t cause you any serious problems, just shorten your production time in a non-critical area. In this situation, you might allow your supplier to ship on a two-week vs. 10-day cycle to meet their OTIF performance. You help them now, and at a later time they may be in a position to help you. 

Let Data Drive the Discussion

It shouldn’t happen often, but occasionally you may have internal debate on how your suppliers are performing relative to expectations. Emotion can creep into these discussions but try not to let it do so.

During my career, I’ve made hasty judgments that, upon digging into the data, turned out to be false. Once, when a supplier had a string of failures in a short period of time, it suddenly seemed like they had become a terrible provider.

But when I looked at the data over the life of the partnership, the reality was they were no different than any of my other strong suppliers. I had to guard against letting my short-term frustration cloud the suppliers’ overall performance. 

Supplier-customer relationships should be focused on the quantifiable facts of the business. Use supplier scorecards and let data drive the discussion. The scorecards should measure the performance of your suppliers in areas that drive the greatest value. If you offer a premium product, weigh quality performance more heavily. If speed of delivery is a key part of your value proposition, then OTIF should be more heavily weighted. Place emphasis strategically on supplier performance areas within quality, cost and service. 

Communicate the metrics clearly to suppliers well in advance so expectations are clear.  Scorecards help focus performance discussions on facts to strengthen relationships. This type of data focus especially helps new supply chain leaders avoid emotional debates because the data speaks very clearly.

Work to Get Better Each Day

Continuous improvement is part of the supply-chain process, even within supplier relationships. Pick a given period—quarterly, annually, whatever seems appropriate for the business—and do a review of what is working well within the supplier/customer relationship and what is not working. 

Upon reflection, take steps to strengthen the good and redesign what needs to get better. In all business relationships, some things go better than others, and being supply chain professionals, we like to practice continuous improvement. 

Keep doing what is working—and where gaps exist, have more transparent communication with your supplier and build improvement plans. You’ve done the hard work of building the relationship—and as with any other supply chain function, you want to see progress continue. 

Plan to Sustain

Think about developing a supply-chain-leader succession plan, so when you hand off a supplier to another colleague, they can build on the hard work you’ve already done. Document not only the process owners but the process itself. 

• Keep all records in online files and make it a living repository, updating frequently as changes occur. 
• Share scorecard data with suppliers and make them dynamic, updating them in real-time. 
• Establish a supplier calendar with milestone checks, including visits and various quarterly meetings. 
• Keep all suppliers current with regulations and company compliance documents to minimize mistakes. 

These types of activities will sustain your work progress and make new supply chain leader transitions much easier.

Pulling It All Together

To sum it up:

Work hard to structure supplier and customer alignment; this should help minimize mistakes and misses on key focus areas. 

Take necessary steps to build trusting relationships with suppliers where you are comfortable sharing data. This should help them deliver superior performance to your company. 

Develop a list of shared KPI’s where you both are focused on the same metrics—and when your suppliers demonstrate excellent performance, try to structure some reward system where both parties share in the success. 

Try to stay away from emotional discussions; focusing on the data will help. Always work to continuously improve the supplier/customer relationship; work to be better tomorrow than you are today.