Supplier Management

What is Supplier Management and how does it work?

Modern supply chains often consist of complex ecosystems that include trading partners and suppliers. Larger organizations often work with different suppliers, both local and international. Implementing a process for effective supplier management is essential to manage and benefit from these strategic partnerships. 

What is Supplier Management?

Supplier management is defined as the process through which a company can maximize the value it achieves from the amount that it pays to suppliers. It focuses on a series of different activities including finding, negotiating, and contracting with suppliers, with the primary objective of maintaining and improving interactions with the company’s suppliers. 

The overarching aim of supplier management is to maximize value while mitigating supplier risks. Businesses aim to improve relationships and maintain clear communications with their suppliers through different management processes. 

Supplier management can be further broken down into three parts:

Managing Supplier Relationships

This is the process through which a company evaluates its relationship with a particular supplier, and devises a methodology to improve or maintain it. An effective supplier relationship management strategy can increase a supplier’s contribution towards the business achieving its goals. 

Managing Supplier Information

This is a critical process through which a business manages information pertaining to suppliers. Supplier information management relates to a series of activities through which companies capture, store, and update information about suppliers. This is necessary for compliance, and helps businesses decide whether to continue with a supplier or not. 

Managing Supplier Lifecycles

Supplier lifecycle management involves businesses evaluating the value generated by a supplier, and adopting a more holistic view from the start of the relationship until its end. In some cases, a shorter relationship might be more beneficial for a company with a particular supplier, so evaluating supplier lifecycles is important for streamlining procurement. 

Barriers to Effective Supplier Management

Companies face major challenges when it comes to effective supplier management. Here are a few.

Lack of Communication

Communication with suppliers is critical for organizations to understand their requirements. If a communication strategy isn’t in place, it could lead to a breakdown in trading relationships.

Contractual Issues

Successful contracts offer mutual benefits to both parties. If the terms are skewed and biased towards one party, it could affect the company’s relationship with suppliers. 

Inventory Issues

It’s important to understand that suppliers often work with several businesses. If you rely on only one supplier, there is a chance that at times, certain items might not be available in stock, which could lead to problems.

Transparency

Maintaining transparency is essential to improving supplier relations. Businesses need to inform suppliers of any upcoming changes to their plans, and maintain transparency to improve relations. 

Key Advantages of Supplier Management

Supplier management offers the following advantages to businesses:

Improve Supplier Management with SoftCo Vendor Management.

SoftCo Vendor Management is an excellent platform that lets you optimize purchasing, eliminate repetitive administrative tasks and identify opportunities when working with preferred suppliers. It offers self-management solutions to allow suppliers to update their information. 

It also drives savings by allowing businesses to buy products or services only from preferred suppliers, especially when prices have been negotiated. It also supports two-way communication within a secure, controlled environment.