December 12, 2020
Curating a PSL can really help to streamline processes and overheads too. By utilising just a few select suppliers, it is possible to negotiate favourable pricing and payment terms. This can significantly reduce upfront costs and make sound financial and business sense.
Another significant benefit of a PSL is the fact that suppliers have a better understanding of your business and what it requires. A strong relationship with suppliers allows them to understand what your expectations are and how best they can fulfil your requirements. What’s more, a supplier will adapt with you. As your company grows and evolves, a close-knit relationship with suppliers will see them moving and modifying with your business in order to support you.
One of the primary reasons that organisations choose to use supplier lists is for the simplicity it can provide. There is a considerable amount of paperwork that can come with frequent supplier changes. Communication can be difficult, and creating a system that works for both of you can take time. Consequently, having a list of preferred suppliers means you have already established a strong form of communication, and you can significantly reduce the level of bureaucracy.
Reliability is another critical benefit of PSL. Suppliers who know what you require can ensure they will be reliable in their delivery. This ensures your expectations are always met, satisfaction remains high, and there is a sustainable, practical and enjoyable reason to continue working with that supplier.
What we notice as recruitment consultants is that a significant drawback of a PSL is the limitations it imposes. For example, a PSL of recruiters means a business will not enjoy access to a broader talent pool. This could restrict their ability to find the right recruit for the company and also make the recruitment process much longer while searching for the right candidate that comes onto the books of the preferred recruitment consultant.
There is typically a lack of flexibility that comes with a preferred supplier list when you are limited to just one or two suppliers. This can dramatically reduce the options available to you and can often inhibit out-of-the-box thinking.
Following on from this is the potential lack of innovation that can occur through a PSL. When you set supplier expectations, a comfortable supplier is unlikely to deviate from these set requirements. Similarly, the business may feel restricted in their options too. It can inhibit the progress the company makes and can cause a stifling effect where the business doesn’t have the opportunity to grow, evolve and seek alternatives that may be better suited for the organisation.
Understandably a PSL can create an air of complacency. Once a supplier is on the PSL, they may feel less inclined to impress or go the extra mile for you. Similarly, a business may close off opportunities made by other suppliers because of the PSL in place.
Often the idea of a PSL is a shrug-off for sales calls. It stops suppliers from getting a foot in the door. However, often when businesses have a PSL in place, they do not know who the decision-maker is for the supplier list and when it is up for renewal. This can lead to confusion and can actually cause PSLs to become outdated and stale if no one in the business takes ownership of it and makes an effort to regularly update it.
With the benefits covered already in the article, it is understandable why businesses would have a preferred supplier list in place. However, organisations must ensure that they do not lose out by having a PSL.
So, how can organisations make their preferred supplier list work harder for them?
Regularly reviewing and updating a supplier list is a fantastic way to show that the organisation will not settle for complacency. If suppliers know that you periodically review your options, this ensures that the suppliers you do work with will continue to provide a high level of service that meets your needs. Any suppliers that do not meet your expectations can then be easily removed and replaced with suppliers that can provide the level of service you’re looking for.
In many cases, businesses drive a hard bargain for the suppliers, which mean the agreement for the supplier is not always fruitful. This can actually cause lower results as the quality is sacrificed for quantity or lower costs.
However, by selecting specialist suppliers who understand the business, it is still possible to strike a cost-effective deal while making the proposal attractive for all parties involved.
With so many suppliers itching to get their foot in the door, it is easy to shut the door on all opportunities to avoid time-wasters. Understandably, suppliers who send out mass blanket emails do not show the commitment in wanting to work with you and shouldn’t command your attention.
However, by considering the suppliers that do work hard to understand your business and prioritise personalisation and professionalism, can actually show the quality that they can provide. When suppliers showcase their abilities, it is worthwhile considering the benefits that you can reap with them on your lists.
For businesses to optimise their PSLs, it can be worthwhile redefining the Preferred Supplier List to Personal Service Level. With this, organisations can set clear expectations and requirements, and the reward for achieving this is worthwhile for suppliers too. This keeps the hunger and desire to succeed. With a results-driven focus, it is possible to get more from your suppliers and increase the cost-efficiency, without shutting the door on potentially better opportunities.