Who becomes a supplier to whom, and when, is largely subjective. For example, a massive electronics business such as Samsung has numerous suppliers that manufacture and deliver various parts for its various products, while Samsung actually manufactures the OLED panels used in Apple’s latest iPhones, which makes them a supplier to Apple.
Unfortunately, issues in a supplier-buyer relationship are almost inevitable every now and then, although most of them can be solved effectively with timely intervention.
In case you are having issues with one or more of your suppliers, the following tips could prove to be quite helpful.
5 Essential Tips to Resolve Issues with Suppliers
1# Handling Quality Issues
Before we get to the part about addressing the supplier who has provided your business with poor quality materials, it is important to understand how the immediate situation must be dealt with first.
When you are in manufacturing, your factory workers will be able to determine the quality issue even before it goes out to your buyer.
Now, it is important to never send out or even manufacture a batch when you know it’s not up to the ordered standard.
If you are left with no other option, then it’s better to talk to your buyer/buyers first about the quality issue, so that they know what to expect at least.
In retail, the effects are more damaging, since the business has no idea about what’s going on, unless the customers start coming in with complaints.
Refund them when possible to maintain your reputation, provided the quality issues are genuine enough. Offer them heavy discounts with an exchange offer, when a full refund is too much to handle.
After the initial damage control, now it’s time to turn your attention to the supplier who is at fault here.
Contact them about the problem immediately to see if there has been a mistake or if they can replace the faulty supplies in time. Sometimes, it’s a genuine mistake and at others, suppliers might themselves be unaware of the quality problems with their products.
Prompt communication might help you clear up the current mess, without suffering big losses, but you will need to take additional steps to ensure that such lapses do not happen again, which we will get into next.
2# Establish Your KPIs and Monitor them Strictly
KPI stands for Key Performance Indicator, which can be defined as a clear set of precise instructions, regarding what a buyer expects from each shipment. Some of the common KPIs which need to be established for all suppliers are as follows:
- Turnaround time and delivery schedule
- Quantifiable, measurable and determinable standards of quality
- Cost per unit, after maintaining the standards of the KPIs
- Compliance to the legal stipulations of the state, and agreed upon company policies
- Compliance to sustainability efforts in manufacturing of the supplies, where applicable
The shipments will also need to be monitored regularly on a pre-established metrics and checked for non-compliance to the established KPIs.
3# Utilizing the KPIs to Solve Issues with Suppliers
Once you have legally established your requirements, you now have the grounds to pursue legal action against a supplier if they repeatedly break any of them, even after warnings.
If a particular supplier had been cutting corners, the credible threat of legal action will ensure compliance in most cases. However, if you have to threat legal action against the supplier time and again, consider switching to a different one after the ongoing agreement period is over.
4# Understand the Supply Chain Better with Professional Education
It is easy to have impractical expectations as a buyer if you do not have an actual understanding of how the supply chain works.
Impractical expectations will not be fulfilled, and when you start taking business decisions based on such unrealistic estimates from your suppliers, both your relationships with your suppliers and the business itself are bound to run into severe roadblocks.
To prevent such scenarios, small business owners can take either one of two approaches, as mentioned next.
Hiring or Training a Supply Chain Manager
If you don’t have a supply chain manager already, then you most certainly need one. Hire someone who has experience and a degree in supply chain management to see an improvement soon after.
However, it is more likely that you already have someone managing the supply chain for your business, but he/she isn’t exactly qualified enough to do so with the efficiency necessary.
Even then, if they have been handling the supply aspects for a while now, they are probably acquainted with the supply chain partners and the company policies quite well.
Get them enrolled in an online supply chain management course to make the most of both worlds.
The online masters in supply chain management program from Kettering University was ranked as the number one online course of its kind, so that’s a good option to consider for the education and the training of your employee.
Getting an Online Masters in Supply Chain Management Yourself
This is a particularly good idea for small business owners, who actively participate in managing the supply chain and solving problems with their suppliers.
You don’t have to take any time off for completing the course online of course, but with each semester, the growing knowledge base will help you streamline and manage the whole supply chain with greater efficiency than before.
5# Negotiating with Suppliers
The most common cause of friction is when a supplier wants to raise the price or the buyer wants to lower it.
Efficient negotiation is key to solving this particular issue and your knowledge about supply management will come in extremely handy during such negotiations.
You will be able to help out the supplier with the logistics to improve their profit margin, without cutting into yours.
Reaching a middle ground should be the objective in a majority of such negotiations, except when you realize that either one of the parties would be at an actual and significant disadvantage if the changes are not made in their favor.
Demand and supply is a convoluted chain that connects multiple industries together in direct or indirect dependence to each other.
Therefore, irrespective of the business, as long as you are in manufacturing, packaging or retailing, you will need to make sure that there are no long lasting issues with any of your suppliers, so that when it’s time to supply your own buyers, they are not left in a difficult situation because of problems on your end.
Author: Abdul Mateen