Are you looking for a resilient supplier management model that will allow you to reduce supply chain disruptions?
You’re not alone.
Chief Procurement Officers and their teams have been on edge now for over a year, operating as best as they can give the present circumstances, but it hasn’t been easy.
The supply chain disruption caused by COVID-19 has led to widespread delays, shortages of raw materials, and subsequent price hikes for goods and services.
The ramifications of the global supply chain disruption are still being felt worldwide.
To give an example, between March 1 and April 13, 2021, organizations around the globe experienced higher than normal late deliveries. In the Netherlands, goods were late by an 87% margin, in the United States by 85%, in France 81%, and in India 78%.
It is against this backdrop that we are going to discuss three supplier management models so you can evaluate your current supplier management model and see how to best make it more agile and smarter.
But first, let us define the term supplier management model.
What is a Supplier Management Model?
A supplier management model is a framework you choose to adopt that governs your supplier relationships.
It’s a structured plan of action that establishes the manner in which you communicate, interact with, and manage your suppliers.
There are three supplier management models you can opt for and each brings with it its own set of advantages and disadvantages.
The ideal supplier management model to select will be dependent upon the type and depth of relationship you wish to have with suppliers as well as your overarching enterprise goals.
Considering the fact that vendors are pivotal in ensuring operations run smoothly within your enterprise, it’s safe to say that the supplier management model you pick is very important.
So, just what are these supplier management models? Let’s take a look.
The 3 Types of Supplier Management Model
By understanding the different types of supplier management models that exist you’ll be able to select the one that best suits your goals. You’ll also be able to align your campaigns and operations to avoid supply chain disruptions. So, here are the three models you need to be cognizant of:
Supplier Management Model 1: Partnership Relationship
It’s neither unheard of nor unusual for businesses to enter into formal partnerships with vendors (or other organizations for that matter) where legally binding contracts are signed denoting the seriousness of the union.
The nature of this relationship might be exclusive meaning the vendor and buyer commit to non-alliance terms with other third parties.
There are different types of partnership alliances that can be entered into:
Vertical Partnerships: Procurement teams and vendors within a niche may come to an agreement to work together to stabilize the supply chain through joint efforts.
Horizontal Partnership: Businesses within a similar industry may come together to improve their overall market position.
Supplier Management Model 2: Integrated Relationship
The importance of good communication skills when sourcing cannot be overlooked or overemphasized.
According to David Grossman’s “The Cost of Poor Communications” report, they surveyed 400 businesses across the U.S. with at least 100,000 employees and discovered that poor communication costs on average $62.4 million per company per year!
If keeping procurement spend low during the seven-step strategic sourcing process is of any importance to your organization, you’ll definitely want to think about this next supplier management model: integrated partnership.
An integrated relationship management model is one that aims to synchronize the flow of information between vendors and buyers through technology so both sides are on the same page.
Practically this may mean working via a centralized e-procurement system so that there is technological alignment. Using such a solution also has numerous inventory management system benefits as well.
The more sophisticated and complex the niche you operate in, the more you stand to benefit if you approach supplier management from the standpoint of developing long-term robust relationships with your vendors. You want your relationship to be more than just transactional in nature.
Supplier Management Model 3: Strategic Partnership
When an enterprise is looking for a serious long-term engagement they may seek to enter into a strategic partnership with a single vendor or a handful of them, sometimes even reaching out to a rival organization.
This type of arrangement is targeted and designed to bring benefits to both sides. Such alliances allow two organizations to share resources, information and enable them to venture into research and development initiatives together.
Also known as strategic alliances, there is an understanding by both parties that the ultimate goal for this coupling is mutual success and growth.
Being aware of the various forms of supplier management models in existence allows procurement teams the chance to discover the type of relationship they wish to enter into with each vendor.
By working closely with a dedicated supplier who has been thoroughly vetted and whose mission and vision align with that of the buyer, other non-performing vendors causing disruption in the supply chain can be let go.
While there are some disruptions that are beyond anyone’s control (natural disasters for example), it makes a huge difference having an experienced supplier with enough integrity to help you keep operations running as normally as possible despite these external pressures.
Through it all, one of the elements that cement vendors and buyers is robust procurement software. The world’s leading businesses and organizations understand this full well, and that’s why entities such as UNOPS, HUD.GOV, and conEdison turn to ProcurePort
To discuss procurement software with a consultant or to schedule a demo of our solutions, contact us today.