Effective supplier management is essential for building a robust, reliable base of suppliers, that form your business’ global chain of supply.
Though often a facet of other job roles, such as procurement or technical positions, effective supplier management is essential to achieving your overall business goals and is an important part of your strategic functions.
This essential guide to supplier management explores common challenges and best practice as well as tips on implementing an effective strategy.
What is supplier management?
In essence, supplier or vendor management is the act of selecting, onboarding and managing your business vendors. It involves making sure they are compliant, their details are accurate, and they are performing to satisfactory standards.
It incorporates several different responsibilities, including:
Relationship Management
The management and maintenance of positive, productive supplier partnerships, often involving the continual assessment of supplier performance.
Risk Management:
Refers to the process of assessing, spotting and minimising risk across your supply base.
You can minimise supplier risk by thoroughly collecting and analysing supplier information and documentation. The user conducts thorough and regular assessments to ensure data accuracy, and in-date compliances and certifications, such as ISO accreditations and policies.
Source-to-contract:
If you take a supplier from selection to contract negotiations, this is known as source-to-contract. After this process, the supplier performance is regularly evaluated.
Supplier management also has a role to play in achieving strategic targets, such as:
Cost-savings: By finding suppliers offer the best value and prices for their services, they can help businesses achieve cost-saving targets.
Sustainability targets: Supply chains contribute significantly to scope 3 emissions, particularly for larger organisations.
If businesses wish to reduce their overall scope 3 emissions, then sustainability drivers need to be considered at initial sourcing.
Ethical sourcing: More consumers want to know they are buying from a brand with commitments to responsible business practices, which extend to who they decide to work with. Supplier management involves assessing whether suppliers align with these values and therefore form an important part of this goal.
Challenges in Supplier Management
When businesses are faced with managing high numbers of suppliers, the management process becomes incredibly complex and cumbersome. The amount of work becomes unmanageable if there isn’t an optimal system in-place.
It’s still very common for those who deal with suppliers to operate via inefficient, manual systems such as spreadsheets.
Common challenges faced include:
No Supplier Oversight:
When using databases stuffed with spreadsheets as a supplier management system, it’s impossible to gain oversight across supplier information.
There’s no easy way of tracking contract expiry dates or assessing whether supplier data is in-date, which compromises data integrity.
Easy Errors:
If spreadsheets are the data collection tool you are using, you might find you are rekeying data very frequently.
Not only does this consume time better spent elsewhere, but it increases risk of compromised data integrity through rekeying errors. This causes issues when assessing supplier compliance.
Underutilised Data Potential:
With supplier data lying in spreadsheets across a basic database without any sense of unity, it’s difficult to get the maximum value out of the supplier data you have. This means it’s hard to make decisions that are truly data-driven.
To discover other pain points faced in supplier management, as well as strategy for overcoming them, see this article on the subject.
Best Practice When Managing Suppliers
At Trade Interchange, we have worked with clients to improve their supplier management processes for over 20 years. Therefore, we have strong knowledge of best practices for managing suppliers.
Standardisation:
This is all processes operating in a consistent, unified format that all stakeholders follow to the letter.
Centralisation:
All vendor management processes operating from one centralised location accessible to all relevant stakeholders.
Optimisation:
This refers to the continual improvement of supplier management processes, ensuring they are continually improved for the purposes of increasing efficiency.
These are hard to achieve without a supplier management system in-place to assist the supplier management in their day-to-day operations.
The Benefits of Software for Supplier Management
By moving from simple systems, to managing suppliers via more comprehensive software for supplier management, you can overcome many challenges commonly faced in this area.
By undergoing a digital transformation of your vendor management processes, implementing an entirely digital, cloud-based system optimised with cutting-edge technologies to streamline processes, companies can complete required tasks in a shorter space of time, with a stronger result.
Essentially, it helps to work smarter in supplier management.
What is source-to-contract in supplier management?
Source-to-contract refers to the process of taking a supplier through from initial sourcing to contract management. This is broken down into various specific stages of the process.
eSourcing
Before a supplier is managed, it needs to be selected based on specific project criterion. Project drivers must also be set, as well as the order of priority.
Once these are decided on, a tender is opened to collect and assess supplier suitability and how best they align with the set criterion. Those who meet the requirements are invited to take part in a supplier eAuction to bid on the contract.
The buying company can use the information available to make an informed decision about the best supplier to select.
To learn about our eSourcing offering, visit the dedicated page here.
Supplier Onboarding
Once the supplier has been selected, any remaining information that wasn’t collected during the eSourcing stage is collected and assessed, allowing organisations to complete their supplier due diligence, making sure they are compliant with all relevant legislation.
To learn about our supplier information management offering, visit the dedicated page here.
Contract Management
Refers to the process of setting out the legal terms, conditions and agreements of the supplier contract, negotiating agreements and setting out agreements.
The supplier contracts must be monitored to keep track of the supplier terms and ensure that these terms are renegotiated before the contract expiry date.
To learn about our supplier contract management offering, visit the dedicated page here.
Performance Management
Refers to maintaining oversight and regularly evaluating how your suppliers are delivering against a set criterion.
Supplier scorecards are regularly used to assess suppliers. This sets out the KPIs and metrics used to assess a suppliers’ performance, which are customised based on the specific business’ priorities.
By successfully managing supplier performance to ensure quality in the supplier delivery, you can facilitate the successful operation of a company supply chain.
To learn about our performance management offering, visit the dedicated page here.
ARCUS® Supplier Management Software
At Trade Interchange, we provide ARCUS®, our configurable supplier management software which digitises source-to-contract, with additional modules dedicated to managing supplier performance, complaints, and product information.
We are more than simple off-the-shelf software that digitises your supplier processes.
Our software can be configured to your needs, tailored to your specific business processes, and optimised with smart technologies, including:
- Artificial Intelligence
- Automation
- Integrations
How ARCUS® can be a key part of your Supplier Management Strategy.
Data-driven Decision Making:
By using ARCUS® Analytics, our data visualisation tool, users benefit from comprehensive dashboards which help identify trends in your supplier data, allowing you to make strategic decisions to improve your overall supply base.
Crack down on Compliance:
Getting supply base insights at-a-glance allows you to swiftly identify whether there is any supplier non-compliance across your supply base, so users can act on it faster.
Improved Collaboration:
All departments involved in managing suppliers can more easily collaborate through a cloud-based system, facilitating collaborative working.
Sustainability Transparency:
By increasing your transparency with regarding supplier sustainability, you can assess what actions need executing to achieve sustainability targets across your organisation.
In summary, by mastering the supplier management process through specialised software, you will unlock game-changing benefits and open-up strategic advantages that weren’t present before, including increased compliance, enhanced efficiency and maximised supplier data value.
If you would like to discover more about the benefits of ARCUS® for your business, book a consultation with us here.
