Have you ever wondered how some companies always appear to have their suppliers in order?
Do you sit up at night wondering what some of the best vendor management practices are and what methods you can adopt in your own campaigns that will yield favorable results?
Well, supply base management may be just what you’ve been looking for.
Supply Base Management Definition
What exactly is supply base management anyway?
Before defining supply base management, it would be good to explain what a supply base is first and foremost.
A supply base is a part of the entire supply network which is by and large controlled by the buyer.
The buyer then manages the suppliers in this supply base through contracts and various purchasing agreements.
With this understanding of a supply base, we can better grasp the meaning of supply base management.
Supply base management (SBM) is the business of running the entire supply base which consists of your immediate (current) suppliers, your minor suppliers, and all future vendors.
One of the aims of SBM is to assist procurement teams to control vendor risk, conduct, and information.
Another goal of SBM is to evaluate business relationships with vendors and develop avenues that promote better management of the supply base.
This procurement practice enables chief procurement officers and their teams to run lean and efficient operations.
The Mechanism of Supply Base Management
How does SBM work? What is the underlying mechanism?
Well, SBM can be split into four major components:
1. Management of core suppliers
2. Management of minor vendors
3. Scouting process
4. Transition management
a. Management of core suppliers
Your major suppliers are the ones who keep operations flowing smoothly. Enterprises cannot afford to go at it alone and must collaborate with their main suppliers as a fundamental business strategy.
The core suppliers are the ones that can elevate an enterprise to the next level of performance.
Such suppliers, because of their unique positioning, understand the market conditions and wise CPOs would do well to harness this supplier insight and experience.
b. Management of minor vendors
· Evaluating suppliers in order to ascertain their capabilities
· Supplier development whereby the supplier’s weaknesses are addressed
· Supplier improvement which involves both buyer and vendor seeking to strengthen the weak areas
· Vendor education whereby the supplier is furnished with the buyer’s goals and core values
c. Scouting process
Instead of waiting for vendors to approach the enterprise, sourcing teams take a pro-active approach and go out to identify and recruit suitable suppliers.
During this step, procurement teams also analyze the supply chains and operations of rival companies in order to glean insights such as potential trends and development changes.
d. Transition management
With vendors selected, contracts can be issued and signed using contract management software.
The transition process varies of course with each enterprise. Transition is a moment of assimilation that sets the tone of how the buyer/supplier relationship will transpire moving forward.
Supply Base Management Best Practices
The procurement industry is changing on a daily basis. Product lifecycles are incredibly much shorter because of increasing automation and the markets are not as predictable as before.
As such, staying relevant is a matter of great importance. That’s why CPOs must focus on implementing the best supply base management best practices. Let’s explore three of these.
- Supplier identification
- Supplier information management
- Supplier performance management
1. Supplier identification
The first port of call for any procurement team in regards to supplier base management is supplier identification.
Enterprises aren’t looking for just any suppliers but quality vendors. Sourcing must be strategic. The right vendor can assist the company to source at the best price possible.
Partnering up with the right supplier gives the buyer access to new markets which can help in keeping procurement costs low.
2. Supplier information management
Large and medium companies deal with numerous procurement requirements every day. As such, the need to have an efficient system for collecting, organizing, and maintaining supplier information is critical.
Without adequate supplier information management buyers expose themselves to risk in the supply chain. Visibility is of the utmost importance.
3. Supplier performance management
How do you know if your suppliers are providing value and keeping to the agreed-upon terms and conditions? How can you track the effectiveness of suppliers?
Supplier performance is routinely tracked so enterprises can benchmark, rate, and grade each vendor. This allows companies to continue working with vendors that are providing them with the necessary value.
The Case For Innovative Supply Base Management Software
Every enterprise would benefit from having an efficient supply base management system and supply chain risk management software.
SBM software mitigates business interruptions by ensuring that there is a continuous flow of stock.
It is imperative to have a reliable SBM solution so production doesn’t stop and negatively affect customer service.
In addition, SBM software promotes favorable relations between the buyer and suppliers. This is key as good faith is fundamental when doing business.
That’s not all, but SBM solutions can also reduce costs along the supply chain while ensuring the right vendor is selected.
All this is of course on par with the underlying procurement principle which requires CPOs to secure the highest quality resources and stock at the lowest available prices.
Supply base management is an important aspect for any enterprise and procurement team looking to streamline operations.
In order to effectively manage the supplier base – adding new vendors, rehabilitating dysfunctional vendors, and eliminating disqualified suppliers from the vendor database, having a robust SBM solution is key.
ProcurePort is one of the leading providers of cutting-edge innovative procurement solutions including SBM technologies and is trusted by enterprises and organizations such as UNOPS, HUD.GOV, and conEdison.