ENTREPRISES & STRATÉGIES — Services & Conseils

Business Administration

“Sane relationships”

Brice Lecoustey (Ernst & Young) (Photo : Olivier Minaire)

Brice Lecoustey (Ernst & Young) (Photo : Olivier Minaire)

Managing the suppliers is a key factor to success, enabling the organisation to be efficient and creative at the same time.

Brice Lecoustey, do companies correctly manage their relationships with their suppliers?

“No generalisation can be made on this matter as relationship management with partners (suppliers or others) is handled differently from one activity and business organisation to another.

Globally, over the past years, the management of suppliers was performed through a rather Manichean behavior, mostly led by the objective of reducing costs in areas where the company has already acquired significant knowledge (raw material, IT, etc.).

However, companies start realising that it is now necessary to create true partnerships with these key suppliers and build transparent and sane relationships (while optimising costs at best), but also to target suppliers not directly linked to their core business.

Yet, there are still large areas of improvement for companies in terms of supplier monitoring: tracking signed contracts with suppliers, monitoring quality, etc. Progress has already been made upstream in the process of tendering and contracting, but very little has been done in the process of monitoring suppliers.

Where, usually, are the biggest gains? Negotiating better rates? Payment terms? Delivery terms?

“The most important gains are made, of course, through the usual ways such as the negotiation of rates, payment delays or delivery terms. However, these quick gains are not the only one to consider. Verification of compliance with proper contract enforcement is also a way to quickly secure substantial benefits. Although negotiations are now the main way to reduce costs at a short term level, they must also aim at fostering long-term relationship with suppliers.

In addition, at a same cost level, negotiating a better quality or better value and effectiveness of services can lead to important gains without having negotiated rates.

Other keys clauses, such as distribution networks, basis calculation for pricing discounts, minimum sales, quality commitment, or delivery time are also sources of potential benefits at short and long term. Therefore, contracting is also a way of supporting the cost optimisation process by formalising the best conditions agreed with suppliers.

Companies also have to keep in mind that for a relationship with a partner to be reliable, effective, efficient and therefore winning, they have to pay a fair price, neither too much nor too little.

Has the current economic environment made customer-suppliers relationships simpler or more complicated?

“The current economic environment has not made the customer-supplier relationships easier or more complicated, it has simply transformed them. Today the desire to optimise costs has led to a significant decrease in prices for a same level of quality of goods and services. Negotiation is no longer performed with buyers only but also with various people within the company.

In this context, companies are facing two new challenges: client expectations must be managed and answered differently by the firms and true partnerships must be created to better manage relationships with suppliers.”