In order to have a seamless supply chain, the implementation of appropriate procedures for paying and ordering from your suppliers is vital. To create trust within your supply chain management system you should pay suppliers as agreed. If your business values customers that pay on time, then you should do similarly when paying and ordering from your suppliers.
In the case where you won’t make a payment by the scheduled date then you should have a procedure in place to tell suppliers in advance. This can help to avoid a situation where stock isn’t supplied due to non-payment of invoices. Honest and open communication is vitally important in these incidents. If your business has a reputation for paying on time then it may offer the freedom to negotiate more advantageous terms such as greater discounts or more units for a previously agreed price/volume.
The Prompt payment Code could open up new suppliers to your business and so you should consider supporting it. This was established by the ICM (Institute of Credit Management) and it encourages companies to stick to good work practices in dealing with their supply chain. By doing so, a business can improve cash flow across the entire supply chain. Prompt payment is also governed by European Communities.
In relation to ordering from your suppliers it is advisable to have an order management system in place no matter how extensive or complicated your supply chain is or what size your company is. Having a system in place will, apart from managing relationships with multiple suppliers, will help manage costs thus maximising cash flow.
Order management systems have many modules available and so it is important to identify how it should operate within your business and why you want to acquire it. Following this you can select the functions for it to include such as:
- Available inventory and sourcing
- Vendors
- Marketing information
- Customers and potential leads
- Order entry and customer service
- Financials
- Order fulfilment
- Data intelligence and reporting
- Financials
The only issue with such systems is that they do not come cheap and so it is important to check if it is feasible for your business. It may be beneficial to seek independent advice about what is available on the market and then purchase software that will grow with your business over time. For more on managing your supply chain, as well as more on paying for and ordering from your suppliers, you can read our guide.
