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How to improve supplier collaboration and build sustainable partnerships


Supplier collaboration is a joint activity that increases the capabilities of the supplier and business, in areas of cost management, process improvement, and product/service innovation.

For procurement managers, supplier collaboration is among the top priorities in today’s on-demand age where supply chain competitiveness is a value creator. To go about creating this value, procurement leaders need to make data-backed supply chain decisions.

However, while there is an enormous amount of data to leverage, it is siloed across departments and systems. The resulting incomplete, inaccurate and inconsistent information can prevent supply chain stakeholders from taking timely, astute actions.

As a result, companies may not be able to:

  • Maintain lower inventory levels
  • Optimise warehousing and transportation costs
  • Shorten lead times
  • Reduce out-of-stock levels
  • Gain visibility into demand and supplier performance

Suppliers also benefit from deliberate supply chain collaboration strategies. They can improve both core capabilities and cost-competitiveness, which can help them win more clients.

What can companies do to improve supplier collaboration?

improve supplier collaboration

As stated above, quality data can drive smart decisions related to procurement and supplier collaboration.

Information on vendors and their products, and their historical performance can help you identify gaps, areas of strength and assess supply chain risk more effectively.

A consolidated view of all supplier or third-party provider data can not only support decision-making but also centralize supplier and their lifecycle management.

Once there is a database of connected and consistent information, companies can automate collaboration and lifecycle management, enhancing supplier onboarding, communication and monitoring, while also saving time through self-service supplier registration and information-sharing for timely strategic actions.

Efforts to improve supplier collaboration also increase transparency and trust. For instance, more often and clearer two-way feedback can help create consensus among stakeholders and tackle issues jointly, ultimately ensuring successful, long-standing partnerships.

The benefits of efficient vendor collaboration are too great to ignore, and must be pursued proactively. Here is a look at the strategies companies can pursue to improve supplier collaboration and management.

Pay attention to the essentials: Expectations, information-sharing and culture

Successful vendor relationships are not merely transactional, but a close, collaborative partnership. Documenting clear expectations from suppliers is critical to performance and friction-free engagement.

For example, McKinsey recommends contracting for performance, where contracts set out the metrics and acceptable quality levels, and establish a monitoring and reporting system for continuous improvement.

Information-sharing is an inextricable part of supplier collaboration. Companies should determine what data and designs they can share with suppliers without posing a risk to their intellectual property or trade secrets.

It is a widely held belief that cultural compatibility and fit are necessary for a strategic buyer-supplier relationship.

Complementary competencies and cultures can go a long way in ensuring smooth vendor collaboration and a sustainable partnership. However, even if the cultures don’t align well, companies can promote openness and transparent communication as ways to create shared value.

Invest in supplier management software

Supplier management software greatly simplifies tracking supplier data, purchase orders and performance – all in one place.

It can contain data from your business (ex: procurement system); data from suppliers (ex: feedback/survey forms); and data from external/third-party sources (ex: analyst reports).

Some of the functions the software can provide include:

  • Defining criteria and processes to assess suppliers
  • Segment suppliers into separate, discreet online workspaces, based on spend and nature of product/service
  • Classifying suppliers as ‘preferred vendors’, ‘strategic suppliers’, ‘basic suppliers’ based on extent of cost and order fulfillment risk
  • Auditing suppliers using KPIs, metrics, tools, and scorecards

A digital-led transformation of vendor collaboration is underway. Sophisticated electronic sourcing tools, analytics solutions, and business collaboration portals offer benefits ranging from advanced spend intelligence and compliance assurance to category strategy development and sourcing events with suppliers.

A joint effort

For investments in technology and collaborative culture to work, procurement departments must form alliances with decision-makers at the top and across other departments.

Without this initial understanding and cooperation, other strategic vendor relationship management actions are bound to fail.

  • The business folks must determine expectations with regard to specifications, customer experience, and branding, so procurement teams can align or adjust purchase decisions to these requirements. In the absence of such a mandate from the top, procurement departments will not be able to make the best possible purchasing decisions.
  • Departmental/functional heads must also participate in procurement-related conversations. Without decision-makers on board, the possibility of spending outside of procurement channels increases. This activity of sidestepping procurement processes is known as maverick spending, and when unchecked, can result in substantial additional costs. A robust procurement system, engagement with decision-makers, and a good supplier management system drive synergistic vendor collaboration and creates significant value.

Also, a collaboration between procurement and finance is seen in every organisation. However, many are yet to bring IT into the mix, and missing out on advantages such as:

  1. Supporting the company’s compliance requirements
  2. Simplifying the IT infrastructure to boost pace of innovation
  3. Improving connectivity and collaboration with suppliers

In a digital age, the interdependencies between finance, IT and procurement are stronger than ever. Not only can they transform supplier relationship management, but they also support broad organsational goals, such as cost reduction, productibity improvement, compliance management, and cash flow optimization.

Strategic supplier collaboration is a driver of business success

success

Any company that relies on third-party suppliers needs to take a strategic view of vendor collaboration and management.

A reactive approach – stepping in only during a conflict – wastes time and resources. It is also detrimental to the company’s reputation and perceptions among vendor communities.

Supplier relationship management should be strategic – beginning even before onboarding a supplier.

A proactive approach that looks beyond purchasing to establishing long-term partnerships is even more important in an age where vendors are allies who help companies innovate.

Procurement has matured; companies must make it a priority to evolve their supplier relationship management to innovate, grow and sharpen their competitive advantage.

Next steps

Looking for a secure tool that allows you and your suppliers to work closer together?

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