Most organisations strive to be on the best possible terms with their clients but too often neglect with third parties that contribute to the success of their business.
The nature of buyer and supplier relations often pits the two parties against each other – the buyer wants to hold onto its cash for as long as possible, while the seller wants its invoices settled at the earliest opportunity.
The result is typical vendor managers may feel that it is leaving value on the table because of the demands of the other side. Their cash flows would be so much better if they could find a way to unlock the power of the tied-up finance.
A collaborative relationship
Collaboration is currently a buzzword among supply chain professionals.
What most buyers need above all – and certainly more than short-term cost or cash flow gains – is a robust and resilient supply chain on which they can depend for the long term. Where small suppliers struggle to prosper, or even to survive, because of cashflow
problems caused by payment delays, the buyer’s interests may be compromised.
In this sense, collaboration is more than just a cliche. By working together using innovative financing solutions and digital technologies that promote visibility between buyers and suppliers alike will both secure short-term gains – cash flow benefits –
and long-term advantages – supply chain resilience.
The effect of such arrangements is to promote supply chain liquidity – both in the traditional sense of freeing up cash to move around the system, but also in the way in which buyers and suppliers can be freed from their traditionally adversarial roles.
The aim is to reduce inefficiencies for all parties, rather than weighting the interests of one side over another.
Unlocking even a relatively small proportion of that trapped value, while simultaneously securing better payment terms for many larger suppliers, would provide a powerful boost to huge numbers of businesses.
Be prepared to have a dialogue with your suppliers in order to build more trusting and confident relationships that endure over time. Where risks have been identified, what plans, if any, does the supplier have in place to mitigate them? And what might you
be able to do to support them in this process?
The more trusting you are of suppliers the more honest they will be to you and the benefits you will reap with a more efficient vendor management system in place.