Your company’s choice in a professional ingredient distributor is essential to profitability. These third party vendors ensure the quality of your food and consistency of your supplies. The importance of a strong supply chain has been omnipresent since 2019 when 51.9% of companies experienced supply chain issues. There has been no alleviation of these issues, as the pandemic threatened a further 75% of all companies’ supply chains.
Although many companies closed during COVID-19, the companies which were able to persevere are those with strong supplier relationships. Forging trusting and valuable supplier collaboration requires the use of proven methodologies. By using these tactics, your supply chain partners, either in person or remotely, your company will be better set up to succeed.
Qualities of a Professional Ingredient Distributor
Before forging or enhancing a relationship with a supplier it’s important to make sure the third party vendor meets qualifications for a professional ingredient distributor. Such distributors should have:
- Strong Safety Precautions (Hazard Analysis or Critical Control Points (HACCP) program): This includes safety measures taken at each step of the distribution process, sanitation maintenance, strategies to decrease cross contamination or allergy concerns.
- Supplier Diversification: Ideally you want to work with a distributor who partners with different suppliers for each ingredient.
- A Detailed List of Added Ingredients (Ingredient Panel): Make sure your distributor is not adding sulfites, sugars, coloring or other additives or preservatives to your ingredients.
As well you should only partner with distributors who are True No So2 certified, meaning their ingredients never contain any unnatural sulfites. This is important because sulfur dioxide is commonly used in preservation and dehydration processes, lowering the quality of the food. With True No So2 certified suppliers you know your goods are maintaining their nutritional integrity for Vitamin A, Iron, Calcium and other essential ingredients.
Lastly, make sure the supplier is not just reputable in your industry, but is a good fit for your company in particular. Research the supplier’s existing infrastructure, reputation, strategies they use as well as their values and interests. Do they align with your business? Does the supplier have the equipment, infrastructure and manpower to help you long term?
NOTE: Large suppliers do not always mean greater value. Collaboration may be of more interest to smaller partners who can invest greater time and effort into your business relationship.
Why is Supplier Collaboration Important?
Although it’s important to work with the right supplier, it’s also equally important your firm has the right systems in place to collaborate with them on an ongoing basis. This means representatives from both sides of the partnership will need to work together on quality-assurance and supply-chain processes.
Companies who collaborate and manage their supplier relationships benefit in the following ways compared to competitors:
- Greater distributor accountability
- Improved business performance
- Higher customer satisfaction
- Increased market share
- Greater revenue
- Higher retention rates
- Higher competitive advantage
- Improved communication
- Better management of supply chain risks
- More profitable deals
- Lower operating costs
- Greater efficiency
- Higher growth
- Greater profitability
Generating Trustworthy Supplier Relationships
There are some practical methods that can help you improve your relationship with your supply chain distributors. Most of these methods are based on building trust between the two parties.
Know Where to Collaborate and Combine Strengths
The best collaborations involve parties actively interested in sharing their best skills and expertise. Set a good precedent in your relationship by helping your logistics partner. Walk them through your challenges and empower them with data and information which they can use to develop the right solution for your company. This ultimately makes suppliers become a vested partner in your supply chain rather than just “another client” on their spreadsheet. Partnerships can result in:
- Improved product performance
- Increased market penetration
- Targeted premium-branded competitors
- Saved energy and reduce CO2 emissions
Agree on Joint Performance Management Goals
To monitor effectiveness, establish clear performance metrics which are mutually agreed upon. Be sure to communicate honestly, listen to the concerns of your distributor and involve them in the goal creation process. Buy-in from senior management of your supplier is essential to ensure resources are available to achieve them.
View Collaboration as Long-Term
Buyers and sellers both describe high levels of trust in relationships that they consider strategic. In most cases, that trust has been built up over time, based on longstanding business relationships.
There are many initial hurdles when collaborating with a new partner which can seem difficult at first. Be sure you and your supplier are aware of the long-term value of setting up effective communication and trust. Work together to build appropriate long-term expectations so both parties understand each other’s long term objectives.
Promote Open Communication
The ultimate goal of supply chain communication is to establish near-transparent communication with your supply chain representatives who act on behalf of your company’s best interest. Greater transparency over sensitive areas such as costs is key to attaining the highest level of collaboration.
Sometimes beginning with a more complex problem prolongs the positive reinforcement of early successes. Starting with a simple collaboration project that delivers results quickly may help build momentum for your supplier relationship. Your supplier can quickly demonstrate a serious approach to collaboration and their willingness to share gains fairly. This can allow your team and theirs to put more faith in your relationship and be more willing to share information transparently, an essential part of collaborating on complex projects.
So why don’t all companies take advantage of supply chain collaboration? Although collaboration strategies for wide cross-functional engagement are common knowledge, to practice them has proved quite difficult. That’s why practice methods for implementing these strategies is important.
Practical Methods to Anticipate Supply Chain Issues
Whether you’re facing uncertain inventory levels or increasing costs, it’s important to identify and troubleshoot these problems early by working with your supplier.
Yet, many companies that work with ingredient suppliers do not have formal processes and procedures to do just that. In a recent study supplier customers claimed that both their firm and the supplier took a relaxed approach to tracking and valuing their relationship. It’s important to implement meaningful tactics to align incentives and share feedback.
Here are a few methods you can establish with your current or future suppliers for increased ability to detect issues as they arise:
Regularly Meet with your Suppliers
Address and tackle supply chain concerns as they occur rather than ignoring small problems which can lead to profitability problems down the road. If a meeting cannot be scheduled, be sure to send quick summary emails to update your suppliers. Carve out time to have periodic reviews with your supplier to assess how you can improve your relationship on both sides.
Use Two-Way Scorecards
These cards are a tool to let buyers and suppliers objectively know if they are supporting each other’s goals. By using the two-way scorecard you can better understand long-term win-win partnership goals rather than focusing on quick money-saving wins that could lead to supply chain issues down the road.
Create Supplier Advisory Boards
These boards are meant to provide guidance for supplier management and collaboration initiatives. Acting as a forum, these boards should empower the supplier base to advise on important issues and collaborate on big picture business strategy. These advisory boards also help manage risks and disruptive threats and can serve as a neutral space to exchange ideas.
With over 75% of companies facing supply chain issues, strong supplier partnerships are now a must-have in order for your company to stay alive. By making sure you carefully consider the following with suppliers, you set your company up for success:
- Where to Collaborate and Combine Strengths
- Joint Performance Management Goals
- Long-Term Joint Values
- How to Promote Open Communication
- Starting with “Small Win” Projects to Build Moral with Newer Relationships
Lastly, try deploying these practical strategies at your business to prevent supply chain issues with your supplier:
- Scheduling Regular Meetings
- Two-Way Scorecards
- Supplier Advisory Boards
Not every supplier is equipped to have the transparent and creative conversations required in becoming a strong long-term ingredient supplier. Seawind Foods is a True No So2 certified ingredient supplier who values creating win-win, value share opportunities. Contact Seawind Foods today to see how our organization can help your firm get a more secure supply chain.