Successful supplier contracts start with communication. A study conducted by OEM Profitability and Supplier Relations revealed that strong supplier relationships provide a four to five times higher increase in value of benefits versus price concessions. Bottom line, improved relationships saves your team money.
Companies benefit by establishing goals and creating an action plan. The key is to develop an environment for open communication. Here are three strategies to refine your communication during contract agreements.
Strive for Open Communication
Building strong relationships with your supplier is pivotal to long-term success. An excellent example is Japanese automotive companies; they are known for their familial relationships with their vendor networks. They share best practices, information, and concerns with their suppliers. It is no surprise that an OEM Benchmark Survey found Toyota and Honda were the most preferred companies to do business with.
To achieve similar success, gear conversations toward the future, not the past. Instill trust and hope in your partners. Emphasize how the partnership will be profitable for everyone.
Set goals for the relationships and encourage open dialogue. Act as a colleague, not a dictator. Take their ideas and suggestions seriously.
Lastly, make communication an explicit priority in your business. Put forth the effort to regularly connect with your suppliers.
Create Straightforward Contracts
A contract manager is vital for growth. Research shows that 85% of surveyed business owners deemed contracts absolutely crucial to a business’s success.
“Every aspect of the contracting process, whether negotiating, drafting, executing, managing, or enforcing, presents a unique set of issues and challenges,” says Laura Fagundes, marketing at ContractWorks. “Fortunately, companies engaged in regular contract management can drastically simplify the complexity of the process by choosing the right cloud-based solution.”
She also outlines the following solutions to counter vague contract language:
œ Create alerts that include deadlines, and work to establish a timeline with contract management software
œ Manage expectations by establishing a contract database for executed agreements
œ Highlight important pages within the contract, and select a service that offers a quick search function
Outlining contracts will help eliminate ambiguity and confusion. As a result, contract managers can stay ahead of the game and secure the best opportunities.
Improve Internal Communications
Internal company communications are just as important as external messaging. Contract managers should not simply be links to outside suppliers; they should be involved in the day-to-day operations of the company. Train them on how to maintain contractual records and monitor compliance issues. As necessary, contract managers can provide guidance on contract matters to operational staff.
And don't forget to inform your contract manager about the business strategy. Educate the individual about significant suppliers and any pertinent details, and use internal communication tools within your company to track the success of the contract. Your contract managers are an integral part of the process.
Communication is essential to improve contract agreements with suppliers. Be open to learning from your partnerships. Craft contracts that everyone understands. And aim to improve your own internal communications.
What are your communication strategies? Share your thoughts in the comments section below.