What is supplier management process?
Most organization rely on third-party vendors or suppliers for the purchase of goods and services. Therefore, how an organization engages, manages, and communicates with their suppliers and builds supplier relationships is critical to their overall success. Supplier relationship management refers to the process systematic assessment of the suppliers’ assets and capabilities in view of the organizations overall business strategy. This determines activities to engage in with different suppliers, and planning and executing of all interactions with suppliers to maximize the value realized through those interactions. Supplier relationship management seeks to develop a two-way, mutually beneficial relationships with the strategic supply partners of a company. Supplier relationship management helps build better supplier relationships and thereby achieve greater levels of innovation and competitive advantage than could be achieved by operating independently or through a traditional, transactional purchasing arrangement.
Supplier management strategy and solutions for business
The strategic approach to supplier relationship management has always been critical for businesses that rely on third-party suppliers. For businesses that strive to succeed in the market, having trusted relationships with dedicated suppliers should be one of the primary goals. In this blog post, we are going to take a closer look at some of the key supplier relationship management strategy that will help you improve relationships with suppliers and streamline your supplier relationship management framework:
Suppliers are not just vendors
For a smooth supplier relationship management, businesses must consider their suppliers as their partners. This partnership should be based not only on financial transactions but also on mutual trust and loyalty between both parties. Suppliers should be made to feel like they are a part of the business. They must be informed about your processes, such as product launch and promotions. It is also essential to listen to their concerns or grievances.
Improve your supplier relationship management with better procurement data and supplier management insights from SpendEdge. Get in touch with our industry experts!
Timely payments are crucial
If you want to retain your suppliers and ensure a good supplier relationship management framework, the first and most crucial step is making sure that they are paid on time. This reassures the suppliers that you are a reliable customer and that you’re easy to work with. In case the payment can not be made on a date agreed, then inform the supplier at the earliest with the date on which they can expect the payment. Suppliers like timely payments just like you like timely delivery of goods and services from them.
Technology in supplier relationship management
Companies can invest in a reliable supplier relationship management software in order to track critical information about their suppliers, all at one place. They can even go further and install advanced purchase order management software, which can be used to create, process, and track purchase orders with the company’s suppliers. Some software solutions integrate these supplier relationship management solutions functions into the same platform.
Have detailed agreements
Detailed agreements are the key to making supplier relationship management easier. When a company relies on a vendor regular basis, it is vital to have a supplier relationship agreement. List out everything that both parties expect from the partnership including item or service description, price, delivery terms, payment terms, and communications. then have both parties sign it. This can either be a simple or complicated one depending on the business requirements. A well-documented supplier relationship agreement reduces the possibility of confusion or disputes between the parties. A flowchart or deck can also be created to explain the process to your team. This ensures that everyone knows their duties and can recognize if something goes wrong in the workflow.
Companies must always evaluate the risks of dealing with each of their potential suppliers. This is especially true in the case where companies have a complex supply chain. Ask for references, years in business, areas of expertise, how they deal with a crisis, what their course of action was the last time they had to deal with a crisis. Maybe the supplier you select is not the cheapest, however, they guarantee on-time delivery with a money-back offering; you can live with that because a chain is only as strong as its weakest link. If your vendor lets you down your whole supply chain may be at risk, which can affect your ability to deliver to your customers. Evaluating your vendor’s risk profile is critical in a good supplier relationship management framework. This way companies can mitigate the risks and be ready to deal with any emergencies in partnership with the vendors, which can help minimize interruptions to the business.
Accommodate cross-border differences
If your company’s vendors are located in another country, the company’s supplier relationship management team should take into account the cultural differences when communicating with those suppliers. Furthermore, attitude toward work almost always varies from culture to culture. So, beware of the pros and cons of such situations. Companies must also consider differences in VAT rates, currency, and other financial differences. Finally, understand the time zone differences so that you are aware of the time slots in which the supplier is available for communication leading to better supplier relationship management and understanding between both the parties.
Think there is scope for improvement in your supplier relationship management strategy? Building an effective supplier relationship management framework has never been so easy! With SpendEdge’s supplier management solutions discover unprecedented insights on procuring the right products and services at the right price levels.