Want to build stronger supplier partnerships while cutting waste?
Smart shopping is about more than just finding the lowest price. It means developing habits that favor both buyer and seller. By following these guidelines, you will:
- Lower your carrying costs
- Build stronger supplier trust
- Move excess stock faster
And the best part? It doesn’t have to be complicated.
Here’s how it works…
Inside this guide:
- Why Excess Inventory Reduction Matters
- What Smart Purchasing Actually Looks Like
- 5 Smarter Purchasing Habits That Work
- How To Cut Excess Stock Without Damaging Supplier Trust
Why Excess Inventory Reduction Matters
Lean hides topics that sound boring… until you realize the cost. Excess Inventory Reduction.
Here’s the truth:
The typical company keeps $142,000 worth of extra inventory on hand to satisfy customer demand. Money sitting idly on shelves.
And it gets worse…
Carrying costs can account for 20-30% of inventory costs annually. The longer inventory ages in your warehouse, the more your profits suffer.
And the kicker?
The majority of excess inventory tends to accumulate gradually due to poor purchasing practices and lacklustre demand forecasting. Fortunately, it can be remedied through better purchasing decisions.
This is why intelligent buyers are turning to inventory optimization solutions and get right-sizing orders before it’s too late. Inventory optimization tools allow you to predict demand, plan purchases accordingly and eliminate excess dead stock caused by ordering based on guesswork.
But the right tools are only half the battle. The other half?
Establish purchasing practices that your suppliers will love you for. Cue the shovel.
What Smart Purchasing Actually Looks Like
Most businesses think purchasing is just about price.
It’s not.
Good buysmanship takes time. How you order, communicate forecasts and deal with issues determines how suppliers behave towards you.
Think about it:
Ordering on panic pricing at the last minute means you’ll pay suppliers MORE. Cancelling orders with no notice means you’ll be DE-prioritised NEXT time. What happens when you order the same amount & open your data up? You become their prized CUSTOMER.
That’s how purchasing habits and supplier relationships connect.
5 Smarter Purchasing Habits That Strengthen Supplier Relationships
Behaviors that set apart suppliers buyers love to work with from ones they endure. Choose a few and practice consistently until you start to see traction.
Forecast Before You Order
Most buyers order based on gut feel. That’s a problem.
Without proper forecasting, you’ll either:
- Over-order and end up with dead stock
- Under-order and miss sales
Hurts your business AND your supplier. Suppliers like predictable orders, as it allows them to forecast production. When you provide them with reliable forecasts they can set aside raw materials, plan production accurately and quote you better prices.
A basic monthly forecast share can travel far. No need for high tech software (but nice if you have it). Just promise to provide expected demand to your key suppliers monthly.
This builds trust… fast.
Order Smaller, More Often
Big bulk orders feel safe. You get a discount, you stock up, you’re done.
But there’s a catch.
Nationally, average days on hand has climbed 12% YoY into 2022. Companies are holding more inventory than ever before, crushing margins.
Smaller, more frequent orders solve this. You:
- Tie up less cash
- Reduce warehouse space
- Stay flexible if demand changes
…And here’s the bonus….Suppliers like frequent smaller orders as it provides them consistent predictable income. MUCH better than feast or famine ordering.
Read also: The Business Impact of Strong Restaurant Branding
Pay On Time (Every Time)
This one is so simple. But so many businesses get it wrong.
Late payments kill supplier relationships quicker than anything else. If you pay on time, you are a VIP customer. If you don’t… You get put on dead last.
Here’s what paying on time gets you:
- Better pricing
- First access to new products
- Flexibility when you need a favour
- Higher priority when supply is tight
Seeing as how 40-80% of business cost is contained within outsourced supplier spend. That small habit affects your businesses wellbeing greatly.
Communicate Problems Early
Things go wrong. That’s business.
However the manner in which you deal with issues affects how your suppliers view you as a partner. Don’t keep bad news off until the eleventh hour.
If you know an order needs to change… Tell them now.
If your payment is going to be late….. Pick up the phone BEFORE the due date.
If demand is shifting fast… Share the data.
Honesty is something suppliers value. They will partner with you in finding solutions if you allow them time to respond.
The reverse is also true: Unexpected issues lead suppliers to squeeze terms, increase prices or de-prioritise your business.
Treat Suppliers Like Partners
This one is the difference between average and great.
If you treat suppliers like suppliers you can squeeze, you’ll get supplier results. Treat them like partners you can grow with, watch miracles occur.
That means:
- Sharing your business goals
- Asking for their honest advice
- Giving regular feedback
- Celebrating wins together
It sounds fluffy. It isn’t. Developing true partnerships results in better pricing, tailored solutions and improved reliability if something goes wrong.
How To Cut Excess Stock Without Damaging Supplier Trust
Here’s the tricky part of excess inventory reduction…
Don’t just cut orders randomly. Suppliers miss out on income that way. They may increase your prices or bury your account.
So how do you reduce excess inventory the right way?
Three steps:
- Share the why. Explain to suppliers specifically why you need to reduce order sizes. They will appreciate the openness.
- Be consistent. Little orders are okay if they happen frequently. Settle into a rhythm.
- Prove it with data. Share your forecast with suppliers and demonstrate how smaller, more consistent orders benefit both of you.
Fact is, suppliers know that carrying inventory is poor business practice. They’d much prefer a customer who buys steadily for decades than one who bulk buys and evaporates.
Final Thoughts
Smart shopping involves more than purchasing good products at affordable prices.
It is about cultivating long-term, value-building relationships. When you concentrate on building trust through forecasting, small orders, paying on-time, truthful communication and authentic partnership… Two things occur:
- Excess inventory drops
- Supplier relationships grow stronger
That’s a win-win a lot of businesses overlook because they view purchasing as a transaction. Purchasing is not. It’s a relationship.
Choose one habit this week. Pick the easiest one. Do it for 90 days and see how your suppliers react. Then layer another habit on top.
The best part is these habits are ALL FREE to implement. You just need discipline.
