How can you increase client retention and boost your company’s revenue through Supplier Relationship Management.

In The 8th Habit: From Effectiveness to Greatness (2013), Stephen Covey writes:

“In a very real sense, there are only two roles in organizations: customers and suppliers. Everybody functions simultaneously in both roles, whether inside or outside the organization; the essence of good business, therefore, is the quality of the relationship between customer and supplier.”

However, creating good quality business-to-business relationships will not happen overnight or by chance. Indeed, even developing such relationships within one’s own company is no simple task. But the good news is that the challenge is not insurmountable, nor does it have to take a lifetime to achieve. You simply need the right mindset and a good framework.

So what defines a good quality relationship between supplier and client?

In today’s world, whether we’re talking about a big corporation or a small business, the following traits are essential to good business-to-business relationships:

• Efficiency: Both the supplier and the client commit to operating as per the agreed processes and costs.
• Transparency: Both parties in this relationship need to be upfront and clear about their relevant activities. Their shared primary goal is to meet their commitments and provide the best possible service for the final clients they jointly serve.
• Innovation: Both companies consistently gather and employ the feedback provided by final clients in order to improve the product and enhance the processes for cost and quality optimization.

The unfortunate reality is that not all commercial relationships are successful. We have all seen or heard stories about companies that, neglecting these traits or unable to live up to them, end up in court, bitterly trying to cut their losses before going their separate ways.

Why is it so difficult?

The problems that can cause a deterioration in the supplier-client relationship are numerous. Some are profound, such as a shift in the companies’ respective values and visions; others are more common yet no less significant, such as one party’s growing inability to deliver the results required by the other. And in other cases, while there may be no substantial problems in sight, in a so-called “VUCA world” (Volatile, Uncertain, Complex, and Ambiguous), the bond we share with our suppliers may not be able to withstand the trials that lay just out of sight.

How can you get it right?

Large corporations spend millions of dollars every year on supplier development and relationship management. It’s important to be clear about the distinction between the two. Supplier development is about providing training, support, and accountability. It helps suppliers elevate their ability to deliver their products or services at reasonable costs and optimal quality. Relationship management, on the other hand, refers to the deliberate efforts made to maintain collaborative and mutually beneficial interactions between the two companies at all times.

Now, Small and Medium-Sized Enterprises (SMEs) do not have nearly the same resources as global companies. Their survival often depends on focusing their attention and efforts on revenue-generating activities.

How, then, can SMEs create a good quality relationship with their suppliers within their limited resources?

In my experience, the key is in the mindset.

We usually expect our suppliers to think of us as “the client,” hoping that, by giving them our business, they will feel engaged in meeting our needs with detailed attention to quality and timeliness. We do indeed want this. But the way to achieve it is not by focusing on us; the spotlight should be on the final client. As a company, we are the middleman, receiving materials or services from our suppliers and adding another layer of value to the product before it reaches the final client or consumer. This may not sound like a ground-breaking idea, but trust me, this seemingly small shift in focus creates ripple effects that will eventually make a profound difference.

When you and your suppliers maintain your focus on the final client’s needs, you will not only elevate your product’s value and your customer service, you will, in consequence, increase your client retention, sales, and revenue.

How can you get started?

•  Strategy. Look at your current customer service metrics and ask yourself what’s working and what isn’t. Then identify what needs to be improved within your operations to be able to serve your clients better.
• Identity. Make sure your suppliers know who your final client is and how their capacity and performance connect with your ability to serve that final client’s needs. (Even if your client is confidential, you can create an avatar of sorts to facilitate referencing them.)
• Indicators. Create “Key Performance Metrics” (KPIs) and related targets focused on serving the final client. As a rule of thumb, make sure you have KPIs on costs, quality, and timely deliveries.
• Feedback. Share and discuss your customer service reports with your suppliers to see your client’s pain points.
• Affirmation. Celebrate successes big or small when things are progressing well with your suppliers.

Soon you will find your suppliers making suggestions, proposing improvements, and developing ideas to do things better for your final client. Cultivating this dynamic flow over time is essential to creating a good and productive relationship between you and your suppliers.

We all know that problems are bound to arise. The solutions to these problems will be as diverse as the difficulties themselves. A consistent focus on the final clients remains the most crucial element in building strong, fruitful supplier-client relationships that will consistently generate revenue for your company and that of your suppliers.

Thanks for staying with me until the end of the article. I send you all my gratitude and good vibes. May all your business initiatives be prosperous. I am rooting for you!

By: The Ana Lovera Inc and Sourcing Values Editorial Team. Copyright 2022.

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Photo by Ian Schneider on Unsplash.