How Do You Manage Supplier Relationships?
It’s a simple fact that suppliers are an essential part of every business, with 70% of the average company’s revenue being spent with third parties. Despite this, for some companies the procurement process ends after signing a contract and starting to use a new supplier. Usually, the only time they engage with the supplier after this, apart from to make purchases, is to complain when there is an issue with the supply.
There are many benefits for companies to actively manage their suppliers, which include, reducing any unnecessary risk through compliance, ensuring they are getting the best value through monitoring performance and building stronger relationships with the suppliers.
What is Supplier Management / Vendor Management?
Every time a company onboards a new supplier there is an element of risk. Supplier Risk Management is a crucial factor for any business and should be carried out regularly for each supplier, especially when they are first onboarded.
A standard company is highly dependent on their suppliers to deliver goods and services. Identifying risks early, such as poor performance or a reduction in their turnover can be an early indication that a supplier might struggle to meet their contractual obligations and therefore having a potential impact on your company’s deliverables.
If a company does identify any risks with one of their suppliers, it is always important to communicate closely with that supplier to discover further details and to manage the potential risk together, especially if they are critical to the operation of the company.
There are a many different types of risk that can be associated with a supplier or supply chain management. However, by managing suppliers these risks can be in most cases removed by a combination of proper supplier vetting when on-boarding, on-going compliance checks and the monitoring of any associated risk. This pro-active approach means that the risks can be avoided or at least mitigated against which is clearly beneficial to the company. A supplier Management Software can reduce the chance of risk as well as providing a benefit of eliminating supply problems via regular supplier evaluation and supplier information insights.
Over the course of a contract there will typically be both good and possibly some bad experiences with the supplier. Monitoring and maintaining this on a regular basis will ensure that when the contract is coming to an end there will be an accurate and fair record that can be referred to. In addition, the record can be referred to in review meetings with the supplier to ensure that they are delivering the best value.
Supplier Lifecycle Management (SLM) is an important strategic process used to manage suppliers throughout the entire relationship between a company and the supplier. It is important for a company to recognise the value and benefits a supplier can bring to their overall procurement processes from when they are first onboarded all the way to the completion of a project or contract. A supplier should be regularly accessed throughout the entire relationship to identify risks or find further potentials they can bring to help grow the company.
What is Supplier Relationship Management (SRM)?
Supplier relationship management (SRM) is the process a company carries out to optimise their supplier’s performance and develop strategic relationships with them. This is another crucial factor within the supplier management process and one that each company approaches differently. The overall goal however is usually the same, to build a stronger and closer working relationship with the supplier, in turn building confidence in results from both parties and also better communication which should result in improved customer service for the company and potentially more work in the long-term for the supplier.
This is one of the most important, and often overlooked, parts of supplier management. The relationship between the company and the supplier should always be open and respectful so that both sides get the best out of the commercial agreement. It also means that the supplier is more disposed to go above and beyond when they are really needed.
The three points above are all part of supplier management and clearly play an important part of the procurement process that should not be ignored.
For many companies, especially larger ones, who have more resources this is easy to do either with their teams using technology. For those companies with fewer resources there is one Supplier Management solution that has been designed specifically for SMEs is oboloo. It is an intuitive and simple solution that also incorporates contract, supplier, and savings management to enable companies to be supplier smart. To learn more please visit www.oboloo.com
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