There are two sides to every coin, and opposite the buyer is the supplier; one truly cannot exist without the other. From a business standpoint, this is the purpose of a well-developed procurement program. Procurement departments have the ability to nurture and establish relationships with a variety of vendors to meet the organization’s needs at the lowest cost possible. The relationships developed between procurement professionals and vendors are all a part of the supplier management process.
As is often the case with procurement, supplier management is a multi-faceted series of systems and processes. However, the results speak for themselves in the form of longer-lasting supplier relationships, higher cost savings, and better rates of productivity and efficiency.
What is Supplier Management
Supplier management is a series of processes aimed at optimizing the value of your supplier and vendor relationships. The value created by supplier management comes in a few different forms. The first is the most obvious: upfront cost. Supplier management tactics and strategies aimed at integrating stronger negotiation guidelines and strategies in order to drive the upfront price of any contract down. These tactics include things like automated reverse negotiations, a stronger vetting process during the RFP phase, and more.
After assisting in driving the upfront cost of the contract down, strong supplier management tactics will look to the lifetime value of a contract factoring in the quality of the vendors. While this is a process that begins with the RFP, a vendor isn’t finished being vetted until there comes a point in which a relationship no longer exists. Initial vetting, however, happens in two phases: the first phase happens prior to the reverse auction and the second phase is a more extensive vetting process of the vendor chosen specifically for the contract.
Implementing Procurement Software
Procurement software is an important aspect of modern-day procurement strategies. Every phase of the procurement life cycle is impacted and influenced by the procurement technology and software that your organization implements. When it comes to supplier management, sophisticated procurement software offers your firm a whole suite of features and capabilities that ease the supplier management process from start to finish.
The RFP process, for instance, is a vital step that takes place prior to the awarding of a contract to a vendor. Procurement software powered by business logic, and AI, assist in the RFP phase by collecting and analyzing data on potential vendors at a much faster rate than manually possible. This in and of itself contributes to a more efficient process with a higher quality of starting bidders ultimately invited to the reverse auction. Procurement software also plays a major role in contract management, an integral branch of supplier management.
Contract Management
Contract management is almost always going to pop up when we talk about procurement, as it’s one of the true pillars of procurement as a whole. Therefore, it plays a crucial role in almost every aspect of the procurement process, especially supplier management. Since supplier management entails optimizing the value received from contracts with vendors in which your organization is engaged, contract management is clearly essential.
Contract management is a branch of procurement all on its own, but it serves a major purpose in supplier management as well. With the help of procurement software, data is constantly being pulled from the contracts for analysis, which leads to a more vivid picture of the actual cash flow within the organization. This spends analysis also allows your procurement staff to make data-driven decisions on current and potential contracts.
The Benefits
The benefits of implementing supplier management software are significant and wide-reaching. Higher cost savings and increased levels of both productivity and efficiency are all direct results of implementing a sophisticated and comprehensive supplier management software, and supplier management strategy.
Additionally, supplier management strategies will increase the value of your organization over the course of the contracts awarded. By using data and analytics, your firm will be able to make data-driven decisions that ultimately benefit the entire organization.
A Quick Recap
Supplier management is the series of systems and processes, from software and tech to manual decision making, through which vendors and suppliers and the relationships built with them are carefully vetted and consistently analyzed through the duration. This leads to better-valued contracts and higher rates of cost-savings, as well as pure operation efficiency. Supplier management is only one facet of the entire procurement organization, but it is also one of the most crucial. Long-lasting supplier and vendor relationships are an asset that brings an advantage to an organization. With long-standing relationships comes familiarity, and often an extension of additional savings where and when possible.
For more information on supplier management in procurement or anything else related to the procurement life cycle, keep browsing ProcurePort. ProcurePort is the internet’s premier place for everything procurement, from knowledge and information to software and technology, and everything in between.