How to Repair Damaged Supplier Relationships
Learn how to repair damaged supplier relationships by using communication, trust-building, and negotiation tactics to get back on track.
By Hugo Britt | September 26, 2023
Picture this: a heated argument, doors slamming, and harsh words exchanged — sounds like a scene from a dramatic episode of Friends, doesn’t it?
Surprisingly, the breakdown of a supplier relationship can sometimes resemble a spat between the main characters of the 1990s hit series. While it may not involve Ross and Rachel, the dynamics at play bear a striking resemblance. In this article, we explore how supplier relationships become damaged, why these relationships are often worth saving, and offer advice on how to repair them effectively.
Understanding how supplier relationships get damaged
The Friends Comparison
Let’s take a page from Friends to understand how supplier relationship breakdowns happen.
- Miscommunication: Remember when Ross thought he and Rachel were on a break, but Rachel had a different perspective? Miscommunication is a key reason why supplier relationships can falter. When expectations aren’t clearly communicated, misunderstandings can escalate into conflicts.
- Quality or Delivery Issues: When Rachel decides to make dessert for her friends, her lack of culinary skills results in an inedible dish (except for Joey, that is…). Consistent quality and on-time delivery are essential in supplier relationships. When these aspects are compromised, it can lead to frustration and disappointment on both sides.
- Price Disputes: The characters often argue over money, particularly when experiencing job losses and periods of unemployment. Similarly, procurement professionals often face pressure to cut costs, and price negotiations can become heated, potentially souring the supplier relationship.
- Changing Priorities: Just as some of the characters’ priorities evolve from career-centric to family-centric over the course of the show, procurement priorities can shift due to factors such as new leadership, changing customer expectations, or economic conditions. Suppliers may not always align with your changing needs, leading to conflicts of interest.
- Lack of Transparency: Keeping secrets inevitably leads to misunderstandings and damaged relationships between Friends. Transparency is not only crucial for building trust in supplier relationships, but is the key to unlocking innovation and additional value.
- External Factors: Just as the Friends group faces challenges like economic crises and social trends, external factors like economic downturns, natural disasters, or geopolitical events can disrupt supply chains, leading to delays and damaged supplier relationships.
Ok, that’s probably enough Friends references for now!
Next, let’s discuss why it’s worthwhile repairing a damaged supplier relationship.
Understanding why relationships falter in the first place is key to knowing how to go about repairing those damaged supplier relationships in a way that builds trust.
Why Salvage Damaged Supplier Relationships?
At first glance, it may seem easier to cut ties and seek new suppliers when relationships sour. However, there are compelling reasons why it’s often more advantageous to repair these damaged connections.
First, consider the cost and resource savings at stake. Repairing an existing supplier relationship is often more cost-effective and consumes fewer resources than seeking and onboarding new ones. It allows you to focus on improving the existing rapport rather than starting from scratch.
Existing suppliers are familiar with your organization’s processes, needs, and expectations. This familiarity can make collaboration smoother and reduce the learning curve to save time.
Are you operating in a constrained supplier market? In some cases, options are limited due to a small pool of suppliers or even a monopoly situation, leaving procurement with little choice but to re-engage with a supplier.
10 Steps for repairing damaged supplier relationships
Now that we’ve established the importance of salvaging damaged supplier relationships, let’s explore 10 steps to repair them effectively:
1. Open communication
Start by addressing the issues openly and honestly with your supplier. Encourage them to share their perspective as well. Establish a clear channel for ongoing communication to prevent future misunderstandings.
This might help: 29 Questions to Ask in a Voice of a Supplier Survey
2. Define expectations
Clearly define your expectations regarding quality, delivery schedules, and pricing. Ensure both parties have a mutual understanding of key performance indicators (KPIs) and service level agreements (SLAs).
Additional resource: 7 Supplier KPIs You Should be Measuring
3. Collaboration and problem-solving
Collaborate with your supplier to identify the root causes of past issues and work together to find solutions. Develop an action plan with measurable goals to track progress.
You might be interested in: The Importance of Cross-Functional Collaboration
4. Revisit contracts and agreements
Review and, if necessary, revise contracts to reflect the new expectations and agreements reached during the repair process. Ensure all terms and conditions are clear and fair to both parties.
What to do: When Supplier Negotiations Come to a Standstill
5. Commitment to continuous improvement
Emphasize the importance of continuous improvement for both your organization and the supplier. Regularly evaluate the relationship’s progress and make necessary adjustments.
Additional resource: How to Improve Strategic Supplier Relationship Management
6. Rebuild trust
Rebuilding trust takes time and consistency. Deliver on your promises and be reliable. Recognize and appreciate your supplier’s efforts and achievements.
7. Escalation and dispute resolution
Establish a clear escalation and dispute resolution process to address any future conflicts swiftly and fairly. Ensure both parties are aware of the steps involved.
Additional resource: Moving Supplier Relationships from Transactional to Strategic
8. Supplier development programs
Consider implementing supplier development programs to help your suppliers improve their capabilities. These programs can enhance the supplier’s performance and strengthen your relationship.
9. Monitor and measure progress
Use Key Performance Indicators (KPIs) and regular performance reviews to monitor the progress of your supplier relationship repair efforts. Be prepared to make adjustments as needed.
You might also like: How to Accelerate Savings in Procurement Without Cutting Corners
10. Seek external mediation
If the relationship remains strained despite your best efforts, consider seeking external mediation or a third-party consultant to help facilitate the repair process.
This might help: Taking an Advisory Approach to Procurement
Skip the supplier relationship drama with Una
Think outside the box and skip the supplier relationship drama by partnering with a group purchasing organization. As a GPO, Una has already done the hard work for you by standing up a portfolio with over 5,000 pre-negotiated supplier and technology vendor contracts.
Alongside incredible savings made possible by leveraging over $100 billion in buying power (Una members see an average saving of 18-22%), joining Una dramatically increases your speed-to-savings by leaving the sourcing and negotiation process to us.
Learn how GPOs can help organizations like yours achieve increased cost savings, reduce procurement and supply chain risks, and formulate plan for procurement success.