Boost your Bottom Line with Effective Supplier Management

Mastering supplier management has become crucial in today’s fast-paced and ever-evolving business world. As global market dynamics shift and supply chains grow more complex, the need for more strategic and efficient supplier relationships intensifies. Smart supplier management is no longer simply about securing raw materials at the best prices; modern supplier management demands agility, quality, and innovation, all while navigating a global supply chain landscape.

Recent global events, including the COVID-19 pandemic, have further highlighted the importance of a resilient supplier base. Effective supplier management is now a cornerstone for ensuring supply chain resilience, risk mitigation, continuous improvement, and maintaining a competitive advantage in unpredictable times.

What Is Supplier Management?

Supplier management is the process of overseeing and working with suppliers to make sure they provide the best possible services or products at maximum value to your company. This includes selecting suitable suppliers, negotiating prices and contracts, validating the quality of products or services, and managing relationships with multiple suppliers.

Why Is Supplier Management Important?

Supplier management is vital for any company that purchases goods. A successful supplier management process involves identifying your ideal suppliers, developing and maintaining relationships, monitoring supplier success, and managing supplier risk.

How to Create Value with Solid Supplier Relationships

An effective supplier management process builds stronger, long-term supplier relationships. Closer partnerships between you and your suppliers can create significant value for your business. In fact, companies that regularly collaborate with their suppliers demonstrate more growth, lower operating costs, and greater profitability than their competitors ¹ —all significant competitive advantages. 

What Are the Benefits of Supplier Management?

Suppliers and supply chains are crucial to your company’s success in this competitive global economy. Having a reliable supplier management process in place offers plenty of benefits, which all lead to a healthier bottom line:

Supplier Collaboration. Continuous communication and collaboration between buyers and suppliers to enhance value and strengthen strategic partnerships.

Supplier Onboarding. Structured processes to identify, validate, and onboard the ideal suppliers into procurement systems.

Supplier Relationship Management. Evaluate the performance and contributions of suppliers to nurture win-win partnerships.

Supplier Lifecycle Management. Comprehensive approach covers the entire lifecycle, from supplier selection, onboarding, and performance management, to offboarding.

Supplier Information Management. Supplier data is consolidated across systems to offer a unified view and in-depth insights that enable real-time decisions.

Central Supplier Portal. Central and secure network where suppliers can submit documentation, track progress, and collaborate on objectives.

Supplier Data Analytics. Data-driven insights that leverage metrics on risks, supply chain performance, and pricing to help procurement make strategic sourcing decisions.

Effective supplier management requires the right combination of processes, technology, and collaboration to measure supplier performance, maximize value, and react swiftly to shifting market dynamics and risks.

5 Best Practices for Effective Supplier Management

The following best practices can help you build an effective supplier management process for your company that mitigates risk and ensures an undisrupted supply chain:

1. Identify business goals.
   
   Your procurement teams first must understand the business needs in order to select the right suppliers and negotiate contracts. Determine what each department requires so you can allocate the appropriate suppliers without duplicating your efforts and resources.
   
   
2. Define selection criteria.
   
   Your selection criteria will depend on your type of business and what it needs from suppliers. Standard measures include price, quality of past work, industry recognition, and reputation.
   
   
3. Evaluate and choose your suppliers.
   
   Next, evaluate suppliers to determine whether they are able to provide the goods or services your business requires. You can then segment these suppliers into specific quadrants based on predefined metrics you’ve created, such as risk, total spend, quality, supplier performance, and more.
   
   Technology can make your job easier. Consider automated segmentation tools to ensure all of your suppliers are allocated to the right group and that there’s no duplication. Negotiate and contract with your chosen suppliers to secure the best prices and quality.
   
   
4. Assess supplier performance regularly.
   
   A structured evaluation system providing timely feedback is key to successful, long-term relationships with suppliers. Scoring is one way to evaluate and measure suppliers’ performance against your business requirements, including delivery, lead time, quality of products or services, price, etc. Scoring assesses all suppliers against a standard set of criteria, which results in a more objective assessment of supplier performance and whether they’re meeting your needs.
   
   Rank your suppliers after you’ve scored them—typically into A, B, and C groups. You’ll gain real insight into supplier performance–who is performing well, who’s just average, and who is underperforming. You can then take targeted action, whether that’s to develop, maintain, or exit the partnership.
   
   
5. Define responsibilities for each team member.
   
   Supplier management is complex and requires the involvement of many decision-makers, business units, and even other teams. It’s easy for roles to get blurred. Set up a clear reporting chain and a transparent workflow so team members know their responsibilities. This avoids internal conflicts and ensures smooth supplier relationship management.

Embrace the Future of Supplier Management

Effective supplier management is pivotal in today’s rapidly shifting supply chain. Establishing strong, mutually beneficial relationships with suppliers is not just about securing the best deals; it’s about fostering long-term partnerships that drive growth and profitability. From managing suppliers and growing your supply chain to achieving higher cost savings and improved quality control, the benefits of a well-structured supplier management strategy and process are clear and impactful.

With the right supplier management tools and strategies, you can create stronger, more resilient relationships with your suppliers that contribute to a healthier bottom line and a competitive edge in your industry.

Automate Tasks for More Efficient Supplier Relationship Management

Consider automating processes such as supplier onboarding, supplier performance tracking, and scoring to build a more efficient supplier management system and minimize miscommunication.

When you’re ready to transition from traditional, manual methods to more efficient, streamlined supplier management processes, Graphite Connect can help. Our state-of-the-art supplier relationship management tools can help you evaluate and onboard the ideal suppliers more quickly and efficiently than ever before.

References:
¹ Agustin Gutierrez, Ashish Kothari, Carolina Mazuera, and Tobias Schoenherr. “Taking supplier collaboration to the next level.” McKinsey & Company. July 7, 2020. www.mckinsey.com/capabilities/operations/our-insights/taking-supplier-collaboration-to-the-next-level