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Suppliers are a crucial part of any supply chain; in today’s world of complex and integrated supply chain systems, the relationship between customer and supplier is more critical than ever. The days of trying to squeeze every penny of savings out of the supplier are gone as procurement teams are beginning to embrace supplier relationships as a key to business success.
What Is Supplier Development?
Supplier development is a business strategy that encourages working closely with diverse suppliers to help boost performance as well as drive continued growth. It involves embracing the expertise of the supplier and aligning it with the goals of the purchasing organization.
Diverse suppliers are engaged on an individual level to build relationships and create benefits for both parties involved. This approach is closely related to supplier relationship management and partnering.
There is no single approach to supplier development. The procuring company and supplier will typically choose a strategy that best suits their relationship, supply market, and industry.
The Role of Supplier Development in Supply Chain Success
Outlined below are just some of the reasons why companies should invest in supplier development:
1. Earn a Competitive Advantage
Through educating and mentoring diverse suppliers in their network, companies can partner with vendors who understand every facet of their business, from pricing to quality requirements. This, in turn, empowers the supplier to offer more competitive pricing and services.
2. Encourage Collaboration Between Individual Suppliers
Small, diverse suppliers often lack the resources, skills, or experience to meet complex or demanding business needs. Supplier development programs can encourage small suppliers to work together to offer solutions that they would otherwise be unable to provide alone.
3. Drive Innovation
Encouraging diverse suppliers to work together to develop unique solutions can lead to out-of-the-box thinking and increase innovation. This can result in the development of products and services not currently available on the market.
4. Create Stronger Long-term Supplier Relationships
Supplier development requires trust and collaboration. These elements encourage companies to foster long-term relationships with their suppliers, helping them gain the economic and business resources they need for continued growth and success. This can eventually nurture a healthier and more beneficial partnership for both parties.
5. Resolve Performance and Quality Issues
One on one interaction with various suppliers offers opportunities for improvement on both sides. For example, the supplier can highlight ways in which the customer can provide support, such as improved communication of requirements or access to specification documents. Conversely, the customer can also highlight areas where the supplier’s service can be improved.
6. Enhanced Customer Satisfaction
While supplier development is aimed at improving the performance of the supplier to the benefit of the purchasing company, personal relationships with the supplier can also have a positive impact on the end customer. Stronger customer-supplier relations can lead to better communication, greater efficiencies, and, ultimately, higher-quality end products.
Supplier development and relationships should be the primary focus of any organization that works with a diverse supplier base. Better supplier relationships permeate throughout the supply chain, translating to better products and enhanced customer satisfaction.
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