Besides your customers, your suppliers might be the next most important group of people with which your organization regularly interacts. This is because, without your suppliers and vendors, your products and services simply don’t get made. If you don’t have goods or services to offer, then you won’t have any customers either. Herein lays the value of supplier management in procurement.
Supplier management in procurement is vital to developing an efficient and productive procurement lifecycle in your organization. Effective supplier management strategies result in a myriad of benefits that boost your business, lead to reduced procurement-costs, and ultimately protect your organization from supplier-side liabilities.
Why Supplier Management in Procurement Matters
There are many reasons that supplier management in procurement is a big deal. Firstly, effective supplier management in procurement protects your organization from significant risk. With the right supplier management tactics in place, contract managers and procurement professionals are better equipped to handle the variety of supplier-side issues that can arise in procurement partnerships.
One of the ways that supply managers effectively reduce risk and cost in your organization is by analyzing contracts and data in order to produce valuable insights from which your leadership can then actively make decisions. Some of this data pertains to duplicate contracts, patterns of one-time purchases that bloat spending, and even unfriendly terms in existing contracts. Having access to this more powerful and granular data leads to better decision-making about contract renewals and expirations and simultaneously grants stronger foresight into future procurement partnerships as well.
Investing in Procurement Software
By and large one of the most highly recognized industry standards and best practices in supplier management in procurement is to invest in the appropriate procurement software. Procurement software comes with a wide spectrum of capabilities and features that assist your team in working more effectively and efficiently.
Since each and every procurement department might look slightly different and will certainly have varying needs, the procurement software solutions might vary from organization to organization. That being said, however, there is two procurement software for procurement professionals to consider everywhere. No matter their industry or market segment.
The first of these software’s to mention is Procure-To-Purchase software. This is managerial software that helps oversee the entire workflow of your procurement department. From the very onset to the very end. Procure-To-Purchase software begins by facilitating and easing the vendor-vetting process, your staff then uses the software to manage everything from the reverse auction invitations to the auction itself, awarding the contract, and moving it along its lifecycle as well.
While procurement departments involve nearly the entire organization from top to bottom, the procurement contracts are such a niche aspect of the procurement process that it’s now an industry best practice to also implement contract management software.
Contract Management Software
With the right contract management software, organizations are rewarded with more potent and powerful insights, deeper data analysis, and more efficient data entry. While Procure-To-Purchase software manages the entire procurement lifecycle, contract management software specifically focuses on the contract management and contract analysis functions.
As mentioned earlier, contract management is a vital aspect of procurement. By implementing contract management software into your procurement process your team will instantly be equipped with more powerful data on existing and potential contracts. This data, in most cases, is imported and initially analyzed by a sophisticated AI. This, in turn, leads to more time back in the schedules of your staff, allowing them to reallocate those hours to more meaningful business activities.
Building Supplier Relationships
Contract management and supplier relationships truly go hand-in-hand with one another. Honestly, when conducting contract management, your team is also passively conducting some supplier management. This is important to realize because, especially in procurement industries, there can be a lot of technical speak, or jargon, used. Not only in day-to-day conversations but also woven into the actual procurement contracts to be awarded. As such, building and developing long-standing relationships with a group of suppliers that you know you can trust offers enormous value. This value isn’t only in cost-savings, its inconsistency, reliability, quality, and sustainability.
One last point to make regarding contract and supplier management in procurement is that the cost of a contract isn’t solely based on upfront price. The true value of a contract considers many more factors, especially quality, durability, and performance.
Summing Up Supplier Management in Procurement
Supplier management in procurement isn’t an option. It’s one of those elements that are absolutely necessary for the function of the department. Therefore, prioritizing supplier management will elevate your procurement team, leading to cost-savings, stranger supplier relationships, and lower supply risk-levels for your organization.
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