There’s no doubt that initiating a new relationship is hard, whether it’s a personal or business relationship. To forge a strong relationship and succeed in your endeavors, you have to build trust and loyalty among your circle of suppliers. Strong relationships attract meaningful and lasting business opportunities.
Lifecycle management gives suppliers and businesses opportunities to forge strong bonds through the aggregation of visibility and data. Strong supplier relationships mean a better and more efficient supply chain, and procurement software makes forming these relationships faster and easier.
Gone are the days when suppliers and businesses secured all data in ERP systems. Now, data is spread across a large surface and across discrete systems that deal with supplier collaboration, transactions, and planning. While it’s mostly assumed that all supplier information is accessible, accurate, structured, and visible, in reality, this is far from the truth.
The central purpose of supplier lifecycle management is to scrutinize and identify the right kind of supplier while optimizing supplier relationships to reduce transaction costs when dealing with myriad suppliers. Supplier lifecycle management has eight phases as outlined below:
1. Supplier Qualification
Supplier qualification is the first step of supplier lifecycle management. This step particularly identifies and determines whether a supplier can fulfill particular requirements. Suppliers across the world are called to participate in vendor selection processes and the best one is determined based on their quality standards.
2. Supplier Evaluation
The second step is supplier evaluation and it involves scrutinizing and critically examining suppliers to ensure they meet and exceed set expectations. This step is critical as it seeks to scrutinize suppliers to determine whether there are any relevant cost-saving opportunities to maximize these relationships. The success of supplier evaluation depends on various assessment techniques, both qualitative and quantitative.
3. Supplier Onboarding
Supplier onboarding is the process of collecting and collating different information and certifications collected from the vendor, and entering these documents into the Approved Vendor List AVL. Onboarding entails the process of collecting and sorting out supplier information, documents, and licenses and integrating them into the administrative systems. This ensures that a supplier is recognized and respected by the contracting organizations to do dealings with. The goal of supplier lifecycle management is to make the supplier relationship functional and practical. Once successfully onboarded, organizations can trace and track the supplier’s performance over time.
4. Supplier Performance Management
Supplier performance management is essentially the practice of scrutinizing suppliers through an evaluation metric known as key performance indicators KPIs. The purpose of performance management is to keep track of suppliers’ positive performance in routine delivery tasks. Performance management ensures that issues are solved in time. Although tracking supplier performance throughout the globe is highly complicated, for better visibility, organizations must actively obtain supplier historic performance data to identify problem areas. This stage gathers information from every step in the supplier lifecycle. This step involves collecting cover information on contracts, performance management, and many more.
5. Supplier Risk Management
Another crucial phase of supplier lifecycle management is risk identification at the supplier base to prevent business disruption. Risk management is among procurement’s most important tasks but it’s often ignored if not overlooked. Risk management is essential for any enterprise as it prevents costly delays, eliminates disruption, and ensures business continuity.
6. Supplier Development
Supplier development becomes of critical importance when you understand that the business relationship is a critical one. Monitoring supplier development ensures that the business works closely with external suppliers to try and streamline transactions, which proves beneficial for both parties. The faster a vendor can deliver and close transactions, the more money they can earn and the more efficient your business operations will be.
Supplier development can also be seen as the process of collaborating with suppliers to improve their business processes. Supplier development comes into the picture when you think about their performance and their ability to meet regular supply requirements. Giving suppliers regular feedback about their business processes boosts their performance and improves their supply base.
7. Supplier Relationship Management
Relationship management primarily identifies strategic suppliers and forms long-lasting relationships with them. Supplier relationship management SRM is among procurement’s best practices. Although supplier relationship management handles the post-contract phase of supply chain management, unlike contract management, this process focuses beyond a single contract. In supplier relationship management, the entire buyer-supplier relationship is taken into account.
It’s worth noting that the primary purpose of supplier relationship management is to forge a mutually beneficial relationship that delivers a sustained competitive advantage and innovation. Supplier relationship management promotes collaboration between parties resulting in reduced risks, lower costs, and greater efficiency.
There’s no doubt that supplier relationship management is not an unachievable task. This phase plays an instrumental role in defining an organization’s success. Adopting a supplier-centric perspective of supply chain and procurement drives significant supplier contributions resulting in performance improvement. For additional information about supplier lifecycle management, you can always reach us.
8. Supplier Offboarding
This is the process of removing a supplier from administrative records. It usually involves suspending the supplier from delivering products to the company. Off-boarding happens when a vendor fails to fulfill essential obligations like after-sale support and warranties. Supplier contracts can be terminated because of failing to meet certain supply requirements, consistent provision of sub-standard or defective products, supplier bankruptcy, or considerable managerial changes.
Procurement – Transforming Your Supplier Lifecycle Management SLM
Today, technology is slowly redefining and changing supplier lifecycle management. Procurement leaders have done more or less by adopting automation. Automated SLM is becoming more streamlined and efficient. Automated supplier lifecycle management creates sustainable supplier engagements, enhancing transparency and trust.
This process also lowers the chances of risks. With organizations and enterprises across the world automating procurement lifecycle processes rapidly, it’s time to act or risk being phased out by the competition. If you’re ready to take the next step and embrace automation in procurement processes, contact ProcurePort and overcome inherent troubles in vendor management.