Building and Managing Ecommerce Supplier Relationships

Supplier relationships can either make or break an ecommerce business. That’s no secret. Given the ultra-competitive web presence between a growing list of ecommerce sites, how your suppliers perceive you is critical. The supplier relationship affects the ability to maintain product inventory, as well as your ability to negotiate favorable terms and pricing. After all, buyers are often just a click away from finding what they desire on another site.

Here are some best practices for maintaining a good relationship with suppliers.

Always pay suppliers on time

Failing to pay on time poses a risk to supplier relationships. It erodes good faith, trust, and can even be a bad decision financially. Suppliers often have associated penalties for late payment. They hate using it since it’s adversarial, but may be forced to if your payments are chronically late. Since so many terms are often Net 30 and beyond, suppliers already give up significant cash flow to work with their customers. Additional drawbacks are that they may introduce costs on the frontend to make up for late payments, meaning the cost of goods and services could increase.

If the intent is not to pay late, but caused by poor operational processes, begin with diagnosing the areas that are keeping supplier payments from being made in a timely manner. Is it a lack of information about the supplier or the invoice? Are there obstacles to the approval cycle? Is the payment workflow (executing wire, check, ACH) taking too long or requires too much executive interference?

Maintain open and ongoing communication

The number one question suppliers ask the finance and AP department is “Where is my payment?” and likely the second is “Did you get my invoice?” That exchange is so classic, it probably deserves it’s own place in the museum of accounts payable. Ongoing communication between an ecommerce business and its suppliers is vital because inventory and availability are directly affected. If your suppliers are across borders, additional communication issues around language and time zone delays can occur. When set against other AP priorities, supplier communication often drops into the ether.

This is where a self-service supplier portal can be a great advantage for a company. By allowing your suppliers to update their payment information, upload invoices, monitor payment status, and review their payment history in a secure, always-available website, many of the most basic questions are answered when they need to know. Naturally, the supplier portal should integrate with invoice workflows and payments data. Some supplier portals offer support for additional languages to work with global suppliers.

Recognize the Competition for Elite Suppliers

In the ecommerce world, competition for suppliers that are offering unique quality products can be fierce. Let’s say you offer a product on your site and the reviews are terrible or that associated customer service is rated poorly. Does that reflect on your site or the supplier? It’s actually a shared responsibility. If a better product is out there, not on your site, buyers will go there. Likewise, if the supplier simply doesn’t value your customers because you have a weak relationship with them, they may not go out of their way to support your buyers. Or if you’re not treating suppliers well, and they have limited inventory, where do you think they will send their products if they have other options?

Making it easier for suppliers and the your ecommerce business are not mutually exclusive. Efficiencies to the relationship benefit both sides. In a survey by PayStream Advisors in their “2016 Supplier Information Management Report,“ businesses with revenues from $100M to $500M stated that their top goals for managing suppliers was “reducing the burden of inquiries on our organization” (24%) and “improving supplier relationships” (21%). Once the challenges of working together on the transactions are solved, more time and energy can be directed to the rest of the supplier relationship.

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Establish a personal relationship with the supplier

Even though email is the easiest form of communication, it’s better for the relationship to establish in-person contact once in awhile or even the occasional phone call. Networking with suppliers can help build up a personal rapport and drive partnerships that are often “off the menu.” Maybe it’s new, upcoming products. Suppose the supplier has an idea for a new product, but can’t it’s risky for them to fund production. As the exclusive distributor, you may be able to invest in the product and offer added perspective you know your customers would love. These are not inspirational points a supplier network or exchange can create for you. They take a trusted connection between a supplier and their storefront.

To arrive at that collaboration point, other areas of the relationship must be resolved, particularly if you’re looking to scale the process to a wide breadth of suppliers. Larger organizations are always harping on improving and optimizing the “supply chain,” which is fine for manufacturing. But for the mid-market ecommerce destinations, there is a lot of potential to bring something new to market if you have an inroad with quality suppliers.