How to build relational trust with your raw nutraceutical ingredient supplier for exponential growth of your company.

Raw nutraceutical ingredients can be of different nature such as natural extracts, superfood or functional foods, there are numerous challenges that companies face when buying raw nutraceutical ingredients, these can be quality, inadequate supply, but also lack of knowledge and information sharing between buyer and supplier.

Costs acculturated during the production of finished product are directly or indirectly related with raw nutraceutical ingredient that manufacturing companies procure. The business process from raising a purchase order to delivery of the procured material to manufacturing factory compound can at times be complicated, so much so that one study suggest that 62% of manufacturing companies are not satisfied with their raw nutraceutical ingredient supplier as they do not trust their supplier sticking to their terms and conditions. Still with such procurement issue nutraceutical sector can grow 30% annually, CLICK HERE to know more on future growth prospects.

Raw nutraceutical ingredients supplier performance is primarily judged on the 2 aspects, first is the the quality of the material and second is how competitive is the price as per current market trends.

How to measure your relationship with your supplier?

This is judged on the basis of suppliers having an excellent buyer-supplier relationship and performance is an attribute which is derived from transactional ties between 2 parties and the concept of trust is defined on smooth transactions only.

If both the parties truly TRUST (Know more about Trust SRM) each other as per buyer-supplier is concerned then that means both believe that the supplier can meet the needs (customised requirements of both product and service demand) of the buying company. Further, if the supplier wishes to develop a long term association with their buyer, the supplier will work very hard on developing specific systems for his buyer via providing innovating solutions that will make procurement each for both the parties.

Research shows that understanding the accurate meaning of supplier trust, which can be defined as efforts that supplier puts in innovating supply process and using technology to develop better buyer-supplier relationship are key factors to exponential growth.

Key factors that cannot be compromised when purchasing raw nutraceutical ingredients?

Being clear upfront:

Drafting clear agreement or terms & conditions in your Purchase order is the correct method of communication with your supplier both legally and ethically, it is considered to be a good start in establishing effective relationship also.

Supplier performance measurement consists of various factors, such as – Flexibility, product quality, on-time delivery and good quality service. Evaluation of your supplier performance in a timely manner encourages the suppliers to deliver their best performance in every transaction.

Research by Hartono et al. suggest that building supplier trust automatically improves supplier performance. Supplier trust is the foremost factor in improving the quality of the product, it helps in minimising lead time and reducing costs. Trust between buyer and supplier can improve supplier performance through smart product design also and hence increasing sales capacity for both the parties in the long run.

Your supplier performance can also be established via Inter-company partnerships in the supply chain, this approach results in the company’s ability to respond to new competitive environments which occur from market trends. Hence if you have great understanding as a partner and can create systems to develop relational trust with your suppliers then both operational performance along with business performance will become more efficient.

The secret to high quality Raw nutraceutical ingredient procurement is based on knowledge sharing with your supplier:

Manufacturing Companies which work rigorously to procure raw nutraceutical ingredients should understand these two types of relationship that they can work upon with their buyers –

First – A transactional relationship which is honoured by binding contracts for a specified period on a said commodity. This method does not build true trust as it is a give and take relationship and both the parties do not share difficulties, specifics or the nature of the supply with each other. Chances of buyers changing their supplier is possible in such relationships.

Second – A Relational relationship is based on moral attitudes, such as trust to share information and knowledge. The second is relationship which is based on trust and this can have a significant impact on performance improvement at the suppliers end and customers which are buyers get to experience good quality service at their end.

Emails sharing with clear objectives and other forms of communications with the primary aim to exchange knowledge between buyers and suppliers will enhance the probability of finding a more novel method to supply raw nutraceutical ingredients.

What are some of the MUST COMMUNICATE factors that your supplier should know before your raise a purchase order?

If Anything, clear expectation in communication and knowledge sharing is a must before making a purchase. The exchange of information during the process increases when an inter-organization trust exists.

Relational Trust between buyers and suppliers enhances good partnership relationships between the two parties.

Research by [Abdullah & Musa] showed that influence of trust is more important than commitment. This suggests buying company’s management should focus on building trust with their supplying partners to achieve better performance and not vice-versa.

Six factors that every Raw nutraceutical ingredient buyer must be possess to grow exponentially?

Trust – Even if you are an old finished formulation company, then also your supplier might know about the raw nutraceutical ingredients market and its supply chain better than you, trusting your supplier on their deliverables and promise is what buyer should focus on and not what the market trend rates are all the time.

Approach – Lack of communication because your supplier is too busy will not allow your company to grow in your own market, let alone in another similar product line. Your must measure if you are having issues to connect with your supplier on a direct call.

Clear communication – What you say is not accurately perceived by your supplier is lethal for your business, its better to delay the deal than to proceed with the transaction without the clear insights, this is very common and lead to immense loss at many buying companies.

Value sharing – As a buyer you must always evaluate is your supplier even worth buying from? Does your supplier haggle (negotiate) too much in value of the product and does he even abide by your requests or rather your wishes are ignored outrightly?

Empathy – Your supplier should be very well versed with your business issues, liabilities, legality, licensing issues etc. for example label claims is a basic understating when selling raw nutraceutical ingredients, wish to read more about Label Claims as per food law in India? To read article on Label claim (image below) CLICK HERE

Reciprocity – Your supplier should understand your requirements at such levels that they are ready to give you certain privileges, if not in price wise then worth wise. This is something that you and your supplier should work out using the third point above.

Majority of the focus in previous research is on buyer-supplier relationship and the same has been done on manufacturing companies.

In industry trust is defined as the belief of a party to the reliability and integrity of its partners. This is a difficult decision because there are risks involved. Trust is a value, a guideline, and an expectation that the partner will do what he or she does by the promise and with satisfactory results.

Trust means a firm belief that your supplier will make an effort that produces positive results for his buyers, and not an adverse outcome for the purchasing party.

Key indicators when procuring raw nutraceutical ingredients?

The indicators used to measure supplier trusts are integrity, credibility, honesty, and transparency. Supplier performance is defined as how well the supplier can produce the products required by the buyer, which is reflected through operational results such as product quality, delivery, responsiveness, cost, and technical support.

Trust includes three things, namely abilities (expertise, experience, education, achievement), virtue (loyalty, sincerity, empathy), and integrity (principle, consistency, suitability between words and actions).

Trust is a social resource that is built according to specific ontologies, goals, and purposes. In every industry trust can be broken due to careless behaviour. In case of raw nutraceutical ingredient supply, it is no different, Hence broad relational awareness, openness, commitment and mutual respect is a must for trust to thrive.

How to Judge the Performance of your Supplier?

Performance is divided into three type
A. Financial – This is measured by Return on Investment (ROI), Return on Assets (ROA), and market share.

B. Non-financial – Is measured if as a buyer your satisfaction is met or not.

C. Operational performance – Is measured by organisational capability in developing product quality, flexibility, and delivery.

Each supplier is expected to have continuous improvement towards their buyers demands. Continuous improvement aims to assist suppliers in continuously improving processes to achieve zero defect targets.

Performance evaluation is conducted to measure supplier performance including delivery speed, reliability, cost, quality, supplier ability in response to complaints, and so on.

How to Judge the trust level of your Supplier?

Trust in Buyer-Supplier Relationship (BSR) can be judged at various business processes stages such as strategy formation, planning, information flow, and operating system. Trust between buyers and suppliers can lead to a range of benefits, including cost savings, improved production quality, inventory level reductions, increased visibility and improved technology.

In the research done by Zhang and Huo, buyer and their supplier willingly exchange knowledge and resources that will benefit both sides, they put efforts to identify how an excel sheet sharing can have clear communication between them on customised parameters.

Primarily Information exchange is of utmost importance if the buyer and the supplier need to grow exponentially. What we should be exchanging is information about products and commodity, ideas on improving the product as per market demand, technical knowledge, evaluating risks and buying back options.

As a leading supplier of customizable raw nutraceutical ingredient, superfoods and natural extracts, we at Rass Biosolution Private Limited focus on advocating relational relationship, its importance for our nutraceutical manufacturing companies, what is the product our buyers but and the commodity that our buyers buyers is also communicated at every level.

We believe that Information and Knowledge at every level should be shared with our buyers. Organising such communication is extremely important else buyer centric databases cannot be built in an effective manner.

If you are an existing or a new buyer of our products and wish to work upon your customisable procurement system do get in touch with us. Kindly WhatsApp us on +91-8090113353

Thanks!

Satyam Khanna

Founder/Catalyst – Rass Biosolution Private Limited