Establishing strong, mutually beneficial long-term relationships between suppliers and distributors can be a critical step towards improving performance outcomes across the whole supply chain. It can be great for cost efficiency and will enable growth and development on both sides.
5 Key Benefits of long-term supplier-distributor relationships:
1. Reduced Costs: Through establishing long-term relationships, both parties can actively look to avoid unnecessary costs. There will be no need for re-tendering or re-negotiation when all was sorted out at the onset of the relationship/partnership. Increased interaction, coming along with long-term partnerships will also lead to fewer incidents that can cause loss or poor performance. This is very common among medical companies who need to source expensive medications. Companies who are reliant on a distributor for their product line should take extra care in nurturing this important relationship.
2. Increased communication and efficiency: The understanding between supplier and distributor improves over time and with that also comes a better understanding of the customer market and the processes each follows. Better integration of business and financial processes will follow and grey area will disappear where issues might have been. Service will improve, become more efficient, and if issues should arise, it can be handled effectively.
3. Consolidation of the Supply Chain: When the relationship between the supplier and distributor develops, the buyer/distributor, will understand the products and services better, and can improve on possible problem points. In return, the supplier will develop a better understanding of the distributor’s needs. Both parties can look to consolidate existing products and services and see the potential for new products or services.
4. Continual Improvement: A long-term relationship will provide opportunities for continual improvement of products and services, as well as, service levels. This will be achieved by developing new processes and procedures and through product development, during the course of the contract term.
5. Outsourcing: Long-term relationships with trusted suppliers can enable the buyer, distributions organization, to outsource some of their noncritical activities. This will reduce internal workloads and can increase efficiency.
Long-term relationships can simplify procurement, warehousing, and logistics to bring supplier and buyer/distributor will bring significant rewards.…