Supplier Relationship, more Strategic than ever

The supplier relationship has long been unbalanced, between an “Almighty” customer imposing his will, processes, deadlines and a supplier with no choice but to comply. This finding is reinforced when we know that 25% of business bankruptcies are due to late payments. However, between technological and legislative developments, the supplier relationship is more strategic than ever and its quality has become much more than a formality: it is now a real competitive advantage.

Major challenges of the supplier relationship

1. Better knowledge of suppliers to create value

A supplier relationship must be considered over the long term, and therefore the company must ensure the reliability of its future providers. For this, the traditional “Cost / Quality / Time” selection criteria are no longer sufficient: it is now a question of having better knowledge through the KYS (Know Your Supplier) procedure, which facilitates the evaluation of partners. The implementation of SRM (Supplier Relationship Management) functions is therefore necessary in the context of sourcing and calls for tenders, because it provides customers and suppliers with a collaboration space on which information is collected and checked upstream.

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2. Establish a partnership relationship with strategic suppliers

To ensure the stability of these relations, it requires not only establishing a favourable environment, but also the rules and conditions of collaboration that will be advantageous for both the company and its suppliers.

Many companies reward the most deserving suppliers, through events, annual meetings, or even key supplier associations … Creating visibility for the supplier by establishing a privileged relationship has a direct effect on improving performance, which ensures both financial gain and competitiveness.

The challenge also resides on a company’s ability to facilitate communication with its suppliers, in particular by providing effective collaborative tools. The use of digitalisation solutions can contribute to this collaboration, in particular the setting up of a supplier portal which will facilitate document management, but also that of disputes. Suppliers can thus view and consult the follow-up of their invoices or even enter and file them directly online. A double advantage for accounting teams: it not only saves time (51% of companies believe that the treatment of disputes and the time devoted to their resolution is the main challenge of the supplier relationship), but also improves the traceability of documents, for better transparency and rapid, efficient and less expensive processing of processes.

3. Integrate the supplier relationship into the company’s CSR policy

CSR (Corporate Social Responsibility) is now one of the major criteria for improving the value of a brand, demonstrating the awareness of the importance of integrating Social Responsibility into the overall strategy of companies. Social and environmental responsibility represents an economic issue for companies, in a context where consumers are increasingly concerned about societal practices. Existing laws make it possible to direct companies in this direction.

Respecting payment deadlines is an integral part of a company’s CSR: The implementation of digitalisation solutions offers the possibility of accelerating the payment of supplier invoices, by automating up to 100% of the processing process. invoices, streamline and monitor in real time the processing and validation status of invoices, from their receipt to actual payment.

However and despite the implementation of regulations, payment deadlines remain long, leading to the establishment and application of sanctions.

To remain profitable and competitive in their market, companies must have a better understanding of suppliers before making a commitment with them, create a partnership relationship with strategic suppliers and integrate this relationship into the company’s CSR policy. The implementation of a supplier portal and Supplier Relationship Management (SRM) make it possible to respond effectively to these three major challenges of supplier relations.

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2. Obligation of vigilance and compliance

For each of these issues, the obligation of vigilance and compliance requires special attention. Indeed, risk management is a key factor to engage its supplier in a strategic and sustainable manner. Supplier analysis must be part of a company’s Risk Management and Compliance system, in order to identify potential risks related to partners (Fraud, corruption, etc.), which allows better control of the supplier relationship from the start.

As mentioned above, the notion of KYS (Know Your Supplier) implies having a certain amount of information and documents available for each of its suppliers.

The issue of compliance with various regulations is also an important point because today, the company must fully ensure the reliability of its future service providers. Thanks to the establishment of a quality supplier base and digitised information collection procedures, the company can – and must – verify the identity of its suppliers in order to better manage the risks of fraud, corruption, and the risk of concealed work. It must also be able to prove that it has carried out these checks.

Coupled with the digitisation and automation of invoice processing, the implementation of a supplier portal equipped with SRM functions therefore responds to the major challenges of supplier relations: better supplier knowledge, a more collaborative relationship, traceability of exchanges… but also additional productivity gains. These actions therefore make it possible to make supplier relationships a performance lever and benefit the entire organisation.

Recommended Reading:

White Paper – 5 reasons to digitalise your Procure-to-Pay Process


Post by Alan Brown,
Sales Director

With more than 15 years of experience in digital transformation, AP automation, AI, Robotics and change. Alan is a key member of the Sales Management team at ITESOFT UK, leading key initiatives on sales and business-development strategies, and supporting customers like BNP Paribas, Hitachi, Helios Towers, and Network Rail to digitise and automate their process.

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