Every business organization purchases goods and services from suppliers or third parties. The output of one organization affects various aspects of other organizations’ goods and services. Therefore, it is very important to analyze how an organization establishes, engages, communicates and manages with its suppliers. However, although supplier management is an important factor, many organizations regularly suffer due to the poor performance of their supplier and their unpredictable behavior. Fortunately, there is something called the supplier management process that every organization should follow to improve the overall performance of their suppliers. Supplier management solutions ensure that you have a good bunch of suppliers for your business. Therefore, it becomes very crucial that you select the right suppliers for your business requirements. This can, in turn, ensure that you are delivering your products and services on time and in compliance with your quality standards and at the right price.
In this article, we have talked about a few important steps that you must follow to select the right supplier who can improve the overall performance of your business. But before talking about those steps, let’s understand a bit about supplier management process.
What is the supplier management process?
The process that ensures that value is obtained for the amount of money that an organization spends on its suppliers is termed as supply management process. Effective management of suppliers makes sure that following activities occur:
- Policy establishment to govern suppliers
- Negotiation and legal agreement between suppliers and the purchasing organizations
- Agreed expectations are met
- Supplier contracts match business needs
- Overall supplier performance management
- Keeping supplier information and records
How to build a supplier selection process?
Identify your supplier
Before the selection of your supplier, you need to gather stakeholder’s opinions and define the selection process criteria. During this time, you need to identify a few suppliers to analyze their capabilities and compare pricing. The supplier selection team should work with the potential suppliers to establish better specifications. For selecting the suppliers, cost should not be the lone driver, but these factors should also be considered:
- Customer service
- Commitments to delivery
- Responsiveness and reliability
- Savings of resource
This is another important step involved in supplier management solutions. This can be done by developing an audit and assessment program. You must conduct an audit before the contract is signed to ensure that the supplier does not have any quality system failures or significant compliance that could impact your capacity to produce good quality products. This also helps you understand the strengths and weaknesses of the supplier before the relationship becomes official. It is crucial to regularly monitor and assess every supplier’s performance. This can also help you to track positive or negative trends.
Gain supplier feedback
This is another step that you must follow before selecting your suppliers. This can be done through a self-assessment questionnaire. Self-assessment by the supplier can be used to determine gaps in their performance as well as discover how the suppliers evaluate their own operation. You should discuss and choose the proper metrics with suppliers to obtain their input and analysis of purposeful measurements. This step forms an integral part of supplier management solutions.