With the business landscape as we know it being so fast-paced, effectively planning your inventory is crucial to maintaining the smooth running of a business. By being able to meet customer demand without struggling with excess inventory, you can completely transform daily operations and remove a huge burden for the buyer.

Following are three key strategies to help enhance supplier relationships through a vendor-managed inventory (VMI) system.

Develop a detailed agreement. Before agreeing to work with a supplier, both parties should be fully aware of their roles and responsibilities. By setting expectations before becoming reliant, a business is able to better manage its inventory and receive orders with realistic stock levels and lead times. Fostering transparency from the beginning will ensure both the supplier and buyer are on the same page.

With a written agreement, the parties can agree upfront on key performance indicators that are expected to be followed. These may include minimum and maximum stock levels, or the notice required by the supplier if there are changes made to orders. By predefining the expectations, both parties can be held accountable.

Another key part of the agreement should be payment terms. Many suppliers are known to use complex financial systems, so being aware of these before getting tied in will help businesses avoid unnecessary costs from popping up. By clarifying the different costs that are associated with the partnership, and knowing whether they’re fixed or variable fees, both sides can prevent misunderstandings.

Assign a relationship manager. A great way to solidify a relationship between a buyer and supplier is to assign a point of contact to oversee the agreement. With an employee in place who’s responsible for managing the supplier, the parties can enhance communication and stay on top of the process.

From the perspective of the supplier, a consistent contact to work with makes communication significantly easier. The supplier can discuss any challenges or disruptions as they arise, while being more likely to help out, should the customer need to hurry an order along or make a change.

On the buyer’s side, the relationship manager can focus their attention on inventory levels and maintain them in line with the agreement. A strong working relationship, and the resulting building of trust, provides a bridge between the parties and enables them to negotiate when needed.

Create a contingency plan. With any business partnership comes risks, so creation of a plan to deal with them helps minimize the impact of unforeseen events. Whether an issue comes from further down the supply chain, such as a transport delay, equipment fault, or natural disaster, these disruptions can have a huge impact on business operations.

A contingency plan defines actions to be taken by both parties for each potential risk. Preparation saves valuable time when an event occurs.

The contingency plan should also consider how financial disruption will be handled. For example, if the supplier is unable to fulfill an order, it should be predetermined whether they owe compensation. A contingency plan ensures that both parties are financially protected, and reinforces a sense of confidence between the buyer and supplier.

A VMI system that strengthens the ties between buyer and supplier is a mutually beneficial way to build up a working partnership. It’s also the key to long-term success when managing a consistent inventory.

Rebecca Barnatt-Smith is content manager at Solvid Digital.