It’s vital to manage ongoing longer-term supplier relationships to ensure that your business is getting the most out of the supplier and the agreed contract.
Some ideas to think about are set out below. The appropriateness and frequency of these will depend very much the nature of the goods/services being provided and the nature of the relationship you have with your supplier:
Performance management: Regularly review your supplier’s performance against the contract requirements and against their competitors. It can help you reduce costs, mitigate risks and drive continuous improvement in your business. See further detail in Reviewing supplier performance and supplier contracts.
Contract review: Regularly review the supplier contract to ensure that the deal you have in place still represents the best option for your business and that you are taking full advantage of any rights you have in the contract. See further detail in Reviewing supplier performance and supplier contracts.
Key dates calendar: Keep a note of key dates, such as when you need to serve notice to end the contract or when you can seek a price reduction or review.
Develop the relationship with key suppliers: Have regular communication to explain the direction of your business, any new plans, and use the supplier’s skills and experience to help you, e.g., they may be able to give you advice on new technologies.
Be a good customer: Make sure you fulfil all your obligations, pay your invoices on time and treat the business relationship like a partnership. You need them as a supplier just as much as they need you as a customer, and it’s important to remember that.
There are a few key areas to focus on when reviewing your supplier’s performance and supplier contracts.
Scope Review: Does your business still need the services or products? Does the scope of services or products meet your current and future needs? Has there been scope creep? If the supplier contract is an important part of what you deliver to clients then look at the client contract to ensure there is a flow through of the requirements.
Performance Review: Is the supplier doing what they should be doing under the contract? How responsive are they to questions, requests and complaints? Could you get better performance, services or goods elsewhere? Look at the market to see what else is out there, and consider using that information in any discussions with the supplier about renewing the contract. If the supplier has not been performing as they should have been, you may be due a refund or credit for poor or non- performance.
Financial Review: Are you still getting a good deal or could you get a better deal elsewhere? Are there any payment review clauses? You may be due a discount or a reduction for being a customer for a period of time.
Legal Review: Are you reliant on the supplier having certain accreditations, permissions or qualifications in place and do they still have these? Has anything significantly changed in law that needs to be addressed in the contract?
Renewal Review: Is there an auto-renewal clause? Have you got the date noted in case you need to take action? Are you familiar with any break clauses or rights of termination in the contract that could be used if need be?
Contingency planning: How critical is this contract to your business? Would there be any knock-on effect for your ability to perform your client contracts? If the contract was terminated by the supplier, do you have a contingency or alternative supplier you could use?
Key contacts: Are these still accurate or do they need to be changed?
If anything does need to be changed then check the contract to find out the agreed process to amend the contract and follow that process. It is likely that you will need the supplier’s agreement to make changes to the contract, so good communication to get a contract that continues to work for both parties is key.
Remember your clients and suppliers may be carrying out the same process, so it’s important that you look honestly and objectively at your own performance as well as theirs.
Lastly, make sure you schedule the next review date and schedule it well in advance of any auto-renewal dates.
Finding the right supplier can be tricky. There are a number of factors that may be important to you and these can vary from supplier to supplier:
value for money
responsiveness/speed of delivery
flexibility/meeting changing demands and urgent situations
For start-ups and small businesses, price and affordability are frequently the key consideration, however, it’s important to bear in mind that cheap suppliers don't always represent the best value for money. If you want reliability and quality from your supplier, then you may need to strike a balance between cost, reliability, quality and service.
Communication is key to ensuring a good working relationship with your supplier, so from the outset make sure that you and the supplier are on the same wavelength in respect of how you will communicate, who the contacts are and set clear expectations about being open and honest, especially if something goes wrong (or is about to go wrong) and needs to be fixed quickly.
When selecting suppliers for your business, consider whether you need to have a choice of supply sources. Buying from only one supplier can be risky if they let you down, or go out of business. Before you contract with a supplier you may want to run a credit check on them to check that they are in a sufficiently good financial position to deliver what you want, when you need it. Also check that they are a legitimate company by running a company search on Companies House WebCheck service.
Finally, it's also a good idea to get references from other customers of the supplier. The supplier should be happy to put you in touch with some of its previous clients, however, remember that they are unlikely to put you in touch with a dissatisfied customer. If you are able to seek references independently, these may offer a more balanced view of the supplier.