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Play Nice: What is the Cost of Poor Supplier Relationships?

Maintaining good supplier relationships is crucial for businesses to control costs and ensure a healthy supply chain, especially in shipping and freight. Long-term benefits, such as improved cooperation and better pricing concessions, arise from nurturing these relationships, while short-term strategies like extending payment terms can lead to detrimental long-term effects. Building trust and transparent communication, along with leveraging data, are essential for fostering successful partnerships between companies and their suppliers.

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Play Nice: What is the Cost of Poor Supplier Relationships?
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Good supplier relationships are without a doubt vital if a business wants to control costs and have a healthy supply chain.
As far as shipping and freight are concerned, BCOs are the customers who directly or indirectly, have to work, collaborate and manage business relationships with several suppliers.
These suppliers may be VOCCs (Vessel Operating Cargo Carriers - or in simple terms, Carriers), OTIs (Ocean Transport Intermediaries like NVOCCs or Freight Forwarders), Haulers, Warehouses, Depots, etc.
To keep their supply chain functioning as expected, for a BCO, fostering a healthy relationship as a company with their supplier partners is a must which in turn provides some substantial long-term benefits that work to the advantage of all parties.
Long-Term Effects Are Detrimental
While short-term gains from pushing suppliers around might give companies more capital to play with, the long-term effects are significantly more detrimental.
The practice of extending payment terms, for example, would give a company more on-hand capital at the expense of making their suppliers wait to be paid. In long-term vendor contracts, many companies end up leaving money on the table simply by not treating their suppliers right. In the case of Procter and Gamble, their suppliers have to wait 75 days to receive payment which has added approximately $1billion to P&G’s cash flow.
Of course, it’s not just the automotive industry that has issues with suppliers that aren’t being treated right. Just In Time deliveries are very prevalent and common also in the retail sector and many carriers are tasked with delivering the cargo at the right time.
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But at the other end of the spectrum, suppliers also need to have some reciprocity in terms of penalties. Just as late deliveries affect the customer, suppliers are also affected due to customers reneging on their booking volumes.
No-shows or late cancellation of containers has been a bane for many carriers as in many cases they are unable to replace the bookings lost at the last minute. have succeeded.
Advantages to Building a Strong Supplier Relationship
Building good business relationships means that partners are more willing to cooperate or even go above and beyond what is typically expected.
The advantages that can be gained by building strong supplier relationships in the automotive industry:
OEM suppliers are more willing to invest in new technology which means an overall better product for the auto-makers. Suppliers are more willing to support the company beyond the terms of their contract. Such support improves communication and suppliers tend to be more honest with their partner companies who treat them well. Last but not least, they’re more willing to give a price concession to the OEM which means more money saved in the long run.
How to Build a Better Partnership
Working with a supplier should never be a “once and done” relationship. As the PPI study points out, the key to building a better business is to start by building better relationships.
The key to a successful and long-lasting supplier relationship is that both parties need to walk away happy at the end of the day. Doing that means that both companies end up being more profitable and
A well-working business partnership hinges on accurate, actionable, and transparent data. As our industry moves towards the digital era, having access to the right data at the right time and anytime is beyond necessary. If we would like to translate this into the world of shipping, it’s important to understand that suppliers, like the companies buying their goods, all rely on freight transportation to get the product
Of course, it’s not just the auIt’s critical. Doing that not only ensures a better relationship with suppliers, but it helps to keep your supply chain moving in the right direction.