Do you need a new supplier strategy?
Are you tired of so-called ‘best supplier strategies’ that don’t seem to work?
We’re going to let you in on a little secret.
You don’t need 100 supplier management strategies to get the job done.
No, you just need the right approach and procedures, and we daresay the fewer of these ‘strategies’ you have the better.
True to form, less is more.
That’s why we’re going to present you with just three supplier management strategies that are guaranteed to drive results.
After you read this, you’ll have the know-how to create a winning plan of action for your procurement efforts.
What is a Supplier Management Strategy?
But wait, what exactly is a strategy, to begin with?
The Collins Dictionary defines a strategy as:
“…a general plan or set of plans intended to achieve something, especially over a long period.”
And what is supplier management?
According to the Chartered Institute of Procurement and Supply (CIPS), supplier management is:
“…the relationship formed between a buyer and a supplier, subject to the criticality of goods or services being purchased and supplied into your organization…”
Therefore combined, supplier management strategies are tactical plans of action (including protocols, systems, and processes) that guide the unique relationship enterprises have with their vendors.
Alright, now that we understand what supplier management strategies are, let’s take a look at the three strategies you need to get the kind of results you’re after.
Supplier Management Strategies for Enterprises
Supplier Management Strategy 1: Invest in Developing Mutually Beneficial Relationships with Vendors
The late industrialist J. Paul Getty once said, “You must never try to make all the money that’s in a deal. Let the other fellow make some money too because if you have a reputation for always making all the money, you won’t have many deals.”
If you want to get the best terms and undivided loyalty from your vendors, strive to create an arrangement in which respect goes both ways and both entities derive value from the relationship.
What do we mean?
On your end as a buyer, honor your commitments while keeping vendors accountable to theirs through monthly score carding and engaging them on their performance.
It does little good to accuse vendors of poor delivery times when your own accounts payables are paid late.
If you plan on developing long-term profitable relationships, it’s imperative to also look out for the interests of your vendors.
What does this look like practically?
· Provide them with consistent business through requisitioning regular volumes of raw materials and or their services.
· Be consistent with your demands so they can also plan accordingly on their end.
· Have a supplier management plan that allows you to stay on the same page in terms of deliverables.
· If you’re working on a credit basis, respect deadlines and pay invoices on time.
· Routinely engage the vendor to hear if there are areas, they would like for you to improve on in your seven-step strategic sourcing process.
Supplier Management Strategy 2: Establish Clear Quality Management Criteria
You must understand that vendors cannot read your mind. They cannot know the quality you expect unless you make it known to them. Drafting up quality management plans and processes makes life easier for everyone involved.
These quality control measures will clearly elaborate:
· How product inspections are to be carried out
· How problems with received raw materials or services are to be addressed
· How corrective action is to be taken
· How feedback is to be given to suppliers
· How performance is to be gauged.
Apart from these measures, quality management methods that may be adopted include:
Procedure Calibration: This involves the creation of a standard modus operandi that will be used to train employees and assist them in recognizing the expected quality
Inspection Processes: How often should inspections be carried out? And at what stage during the manufacturing process?
Mockup Inspection: Prior to mass-producing a new item or after the manufacturing process has changed, what is the protocol to inspect a finished product?
Supplier Management Strategy 3: Discuss and Include Contract Flow-Downs into Vendor Contracts
What is a contract flow-down?
USLegal.com defines a flow-down clause (aka pass-through or conduit clause) as:
“…a contract provision by which the parties incorporate the terms of the general contract between the owner and the general contractor into the lower tier agreement.”
Put another way, a pass-through clause is designed to bind a supplier and their sources to the terms and conditions the procurement team signed with their client in the original contract.
For example, in a procurement contract, a sourcing agency will have a contract in place with a manufacturer.
In turn, the sourcing agency may subcontract to vendors signing a separate contract that excludes the manufacturer.
However, the sourcing agency will include a conduit clause provision that binds the supplier to the exact same terms and conditions as it is obliged to legally adhere to with the manufacturer.
As a result, everyone along the supply chain is working in tandem and is aligned, ensuring that the manufacturer gets exactly what they requested.
Armed with the knowledge of these strategies you can begin adjusting or simplifying your supplier strategy.
ProcurePort is committed to helping you manage and improve your sourcing in supply chain efforts. Use industry-leading procurement software such as our robust contract management platform to strengthen supplier relationships.
If you’re looking for leading procurement software solutions look no further than ProcurePort. Trusted by enterprises and organizations such as UNOPS, HUD.GOV, and conEdison, our solutions are robust and intuitive.
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