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To best manage supplier relationships, the Purchasing department needs to be reactive, but also and above all proactive. Closely linked to the company’s operational needs, it has a real need for autonomy.

Autonomy requires a fair definition of the necessary processes (without falling into administrative burden) and a good definition of possible and useful responsibilities and delegations.

Formalizing a supplier relationship through a contract

A contract is a voluntary agreement, formal or informal, between several parties and recognized by law. In practice, a “supplier relationship” can be formalized in various forms: letter, document, email, etc., but can also be the subject of a simple verbal agreement or a handshake. Among the common practices in a supplier relationship is the concept of “de facto modification,” when the terms of exchange are changed by one party without the other party reacting (either because they are unaware of it, or because it does not disrupt the smooth functioning of the relationship).

As a reminder, there are 4 conditions for the existence of a contract:

1. Legal capacity of the parties

2. determined or determinable object

3. Lawful cause

4. Exchange of consents

The only reality that matters is: “What evidence do we have regarding the existence and content of the agreement?”

This is where the benefit of using contractual agreements for supplier relationships becomes clear, particularly in response to the growing need for protection in the face of an increasingly restrictive and complex legislative environment. Thus, using a contractual agreement:
• allows for the structuring of a complex, high-stakes relationship (objectives, resources, exchanges, intellectual property protection, etc.)
• saves time by formalizing common rules for repetitive use and simplifies day-to-day management (framework agreement)
• ensures traceability, and even continuity, in changing environments (employee turnover)
• Among the major drawbacks hindering the adoption of this practice:
• Can significantly delay the decision-making process
• Can be expensive to implement and maintain (expertise, numerous changes)
• Can foster a climate of suspicion and risk aversion, leading to indecision or inaction
• Can, paradoxically, severely limit exchanges, or even dehumanize them (e.g., no informal buyer/seller interactions)
• Laws or decrees are sometimes lagging behind the most modern or innovative practices (legal vacuum)

The delegation of commitment

Opening a supplier account normally falls under the Purchasing department, but can also be delegated to procurement officers, or even to accounting, ideally with authorization from the Purchasing department to maintain control of the supplier database.

If the supplier is strategic or critical, monitoring will be handled by the purchasing department through a dedicated dashboard.
Depending on the nature of the supplier relationships, the company’s purchasing policy, or the criticality of the purchased products, the purchasing department may be involved in: placing orders, operational management (ordering, delivery, invoicing), and may also play a role in resolving disputes.

The advantage of this approach is that it can be integrated into a quality and optimization process, in order to improve overall productivity.

Documents that make everyday life easier

Drafting a generic document outlining the General Terms and Conditions of Purchase (GTC) is a good practice that helps secure relationships between partners. The framework agreement is also a tool that can facilitate order processing at the operational level.

Finally, to optimize and streamline purchasing management, the implementation of delegations of signature and/or commitment is a path to explore.