Customers who tried to buy hand sanitizer at the beginning of the coronavirus pandemic suddenly became keenly aware of how crippling supply chain disruptions can be. Wherever they turned—online behemoths, chain retailers or even their local drug store—every possible outlet was out of stock. No one knew where the next order was coming from, or when it would arrive. Most didn’t even know who their supplier was, or where the hand sanitizer even came from (most of it actually comes from Ohio and France, by the way).
But as the pandemic wore on, even the most experienced procurement professionals began facing similar experiences in their work life. For all manner of reasons, normally reliable suppliers were suddenly unable to fulfill orders—staff were subject to stay-at-home orders, transport and shipping links were disrupted, and factories were overwhelmed by a sudden influx of demand. If you had asked anyone in the industry what their biggest problem was at that time, they likely would’ve said a lack of communication with their supplier.
For many procurement leaders, a big takeaway from the experience of the last few months has been a realization that they need to improve their supplier relationships—learn more about them, speak more often with them, work more closely together. Your suppliers are the backbone of your supply chain, so make sure you know them well.
Choose your suppliers carefully
The supplier-buyer relationship starts well before the first shipment is delivered, so be conscious of relationship-building and risk mitigation well before you even make that first phone call.
Before you even engage a new supplier, think first about why you’re purchasing what you’re purchasing and decide what you need from your supplier when it comes to that product. If you’re buying office stationery, perhaps you’re just looking for the best price. But if you’re buying high-tech componentry to be incorporated into your own products, then you will have a more sophisticated set of criteria. Make sure you know ahead of time what you want and communicate your goals to prospective suppliers.
During the vetting process, be sure to check references and benchmarks, so you have a deep understanding of not only the item you’re buying but also the company supplying it. If it’s feasible, try to visit the supplier’s facilities to do an inspection—even bring colleagues from other departments. As they talk with supplier representatives, your engineers, product developers, and financial professionals will likely think of questions that you wouldn’t have considered. All this information will make you better informed to make your choice and will help build a richer relationship with your supplier.
Just as you will want to know about a supplier’s prices and delivery policies, it also pays to find out their disaster recovery and crisis management plans—what will they do if their transport links are cut, their workforce is incapacitated or they receive a huge uptick in demand? And whenever possible, try to avoid single-sourcing of items. Or at least have a back-up source at the ready.
Work with suppliers closely
Your relationship with any supplier shouldn’t be a one-way street. Encourage the companies you buy from to manage upwards, so you know what to expect if situations change—either for better or worse. That way if there is a breakdown somewhere, everyone can be involved in the solution.
When it comes to suppliers, buyers too often believe that because they’re the customer, they can dictate to your suppliers. But most of the time—and especially with key suppliers—that’s rarely the case. The procurement-supplier relationship should be one that is built on trust and empathy and understanding that even though the supplier wants to deliver for you, things happen that can disrupt a scheduled delivery or affect the availability of certain products. But by building a relationship early on and maintaining a regular cadence, chances are you will rarely be surprised.
Know your suppliers intimately
It may seem like an obvious point, but it’s important to know who your suppliers are and how you can get hold of them. As the COVID-19 pandemic swept across the globe, grinding many supply chains to a halt, many procurement managers found themselves reaching for the phone and asking, “who’s the person I should speak to about my order?” A common problem for many procurement officers was that they didn’t have specific names, numbers or emails for a real person they could talk to about their order—or if they did, it was on a paper invoice back at the office, or as a jpeg on someone’s hard drive while they were working remotely under stay-at-home orders. Knowing who your supplier is and how you can get hold of them is critical. Make sure your records are always up to date and easily accessible digitally, from anywhere in the world.
You never know when or where supply-chain disruption can hit!