The times when the supplier network was limited to a couple of contractors who just fulfilled orders are long gone. Today, to mitigate supply chain risks and minimize their consequences, companies are increasingly looking to build solid and long-term business relationships with their suppliers by becoming partners with them.
However, such a business strategy often faces significant obstacles, ranging from production downtime to a need for more process transparency. In this article, we will cover these bottlenecks and tell how to get rid of them with SAP Ariba solutions.
Why Is It Crucial to Build Resilient Supplier Relationships?
Deteriorating economic outlook, high inflation, rising energy prices, trade and supply chain disruptions, and demand imbalance have significantly impacted the global market and are unlikely to leave businesses in peace in the foreseeable future.
Today, experts identify three main channels of business vulnerability:
Low profit due to higher energy prices
Difficulty finding as banks avoid the risk
Resilient supplier relationships can minimize the impact of these factors and provide a much-needed business assistant who can offer a fresh perspective on business processes and help reduce supply costs.
However, this will not be enough. Besides building positive supplier relationships, companies should focus on transparency in their procurement processes.
Pros and Cons of Transparency
One of the crucial cons of transparency is vulnerabilities created. Due to the requirements of governments, consumers, NGOs, and other stakeholders, businesses must disclose more information on their supply chains.
But as research shows, consumers may be willing to pay 2% to 10% more for products from companies that provide greater supply chain transparency. Transparency is also a guarantee of resilient supplier relationships and provides the following:
Improved customer relationships
Greater employee engagement
But to achieve these goals, businesses require the right tools to control and delegate their functions.
Where Do Companies Require More Transparency?
Here are three processes that need more transparency.
Besides the necessity to involve unfamiliar or new carriers, shipping often gets complicated due to taxes, duties, and permits. All this paperwork associated with international shipping hinders rapid data gathering. And if the supplier does not have timely and accurate information, it’s impossible to know when or why the shipment is stuck.
Unfortunately, despite the contracts, suppliers do not consistently deliver what they promised. It happens due to misunderstandings in the supplier's capabilities and can lead to severe issues, even in the short term.
Without a clear budget and quality requirements, procurement managers will be forced constantly to deal with such dilemmas. To ensure clarity in the future, you should discuss your realistic goals and needs with suppliers.
How SAP Business Network Provides Transparency
SAP Business Network helps companies to identify and act on opportunities to improve supply chain efficiency and performance. And the process transparency within the network helps enhance a company’s reputation and therefore attract more customers because it:
Improves communication between all partners;
Shares relevant information, for example, comprehensive financial reports or customers aware of matters that are relevant to them;
Adds rationality to decision-making to provide greater transparency and trust in future decisions;
Embeds a sustainable culture to attract like-minded people and create a better and more trustworthy pool of suppliers.
Besides the benefits mentioned, SAP Business Network users noted the following particular changes:
Saving money and focusing on building relationships with only the best suppliers
Reducing customer operational working hours by more than 20,000 hours due to processes automation
Increasing year-over-year savings by 50% due to the sourcing process transparency
Achieving faster customer fulfillment
Transparency in measuring, managing, and optimizing sustainability performance is essential to maintaining good supplier relationships. It can help minimize and mitigate supply chain risks.
You can’t have too many allies in the business world. See your suppliers as opportunities to grow industry credibility, help fellow businesses succeed, and expand your company’s reach.