Ensuring raw materials are available as and when they are needed in a timely fashion is one of the major issues worrying many procurement managers today. This explains why it is imperative to understand supplier management.
But what is supplier management in procurement exactly, and how can you, as a procurement specialist make the most of it? Here’s everything you need to know to help your vendor management efforts.
What is Supplier Management?
Supplier management, also known as supplier relationship management or vendor management is the process of identifying suppliers, evaluating vendor efficiency, gauging compatibility, and managing and negotiating contracts.
The Chartered Institute of Procurement & Supply (CIPS) defines supplier management as follows:
“Supplier management is the relationship formed between a buyer and supplier, subject to the criticality of the goods or services being purchased and supplied into your organization, determines the type of working relationship that you should look to form with your suppliers. “
Here is a visual representation of the vendor management process:
This shows that the vendor management relationship is never static but one that’s always evolving.
Supplier Management Best Practices
To aid in your efforts to improve supplier management, here are several best practices you can adopt.
1. Adopt supplier management systems
Supplier management systems provide an excellent way to collect, manage, and aggregate information from various vendors. Supplier management software such as that provided by ProcurePort can consolidate vendor data and relationships in a centralized platform.
2. Outline KPIs that measure supplier performance
Having quantifiable key performance indicators to gauge supplier performance is paramount. Management guru, Peter Drucker once said, “You cannot improve what you don’t measure.” The same is true here. How will you know which areas of your vendor management cycle need improvement if you aren’t measuring metrics?
3. Keep communication channels open with suppliers
Having a strong vendor supplier relationship is a win-win situation that you should want to be in. Such a relationship however is forged from a strong will and determination. You need to be open with your suppliers about the type of relationship you want to build with them so you can collaborate effectively.
4. Identify risks and address them
Routinely evaluate the supply chain and supplier risks. Assess weak areas and determine mitigation measures that can be deployed. Unresolved risks will disrupt overall performance, cut into profits, and affect value along the entire supply chain. Analyze, assess, and mitigate risk.
Remember that the enterprises with the best procurement teams are those that pay attention to the details. Don’t overlook these best practices. With that said, let’s consider 5 reasons you should make an effort to invest in supplier management systems.
5 Best Reasons To Invest in a Supplier Management System
You may be asking, “Why do we need supplier management systems?”
That’s a good question.
Well, we are going to do our best to present the arguments in favor of supplier management systems.
1. Improve service delivery
Procurement isn’t new. In fact, it dates back to ancient Egypt. Even then, clerical scribes were cracking their heads on the best procurement practices. Every procurement team is always searching for ways to improve service delivery.
That’s why in part we have seen a rise in companies that outsource their procurement requirements because they simply cannot handle their own needs. With supplier management software, businesses don’t have to look outside for help.
2. Mitigate operational expenditure
Procurement spend can reach astronomical heights – just ask the United Nations whose procurement spend came to an eye-watering $18.8 billion in 2018 alone! Left unchecked, operational expenditures can balloon but tempered with efficient supplier management software, efforts can be made to mitigate spend.
3. Improve management bandwidth
There are only 24 hours in a day. Time and energy are finite resources. By eliminating manual vendor management processes and automating them, sourcing and procurement teams can focus their efforts on the core functions of business without feeling like they are being stretched too thin.
4. Improve financial efficiency and accountability
The use of a consolidated vendor management platform allows you to bill strategically without going through various third parties. This improves financial accountability and transparency while increasing your overall purchasing power.
5. Enjoy centralized communication
Supplier management software is advantageous in that it provides you and your suppliers with a dedicated platform from which to communicate.
Did you know that people spend on average 15.5 hours per week checking and sending emails? That’s 20 full working weeks of the year!
With supplier management software, communicate directly, and cut back on wasted time trying to find emails in a messy inbox.
When you understand the benefits to be derived from deploying vendor management software, it becomes easier to see ways to improve your procurement efforts across the board.
Supplier management is a process that requires constant evaluation and monitoring in order to be improved. Procurement teams should strive for optimal vendor supplier relationships as these will positively impact operations.
In most cases, the stronger the relationship between vendor and buyer, the better the resulting collaborations.
To enjoy the rewards of an efficient vendor management relationship, sufficient energy and time must be invested. Fortunately, this isn’t a path you have to walk alone.
If you would like to discuss supplier management software with a consultant, or to schedule a demo, contact us today.