What is Supplier Benchmarking?
Choosing the best suppliers, vendors, and strategic partners can make or break a company in any industry, and more often than not, businesses fail to account for various crucial factors while selecting a partner, giving rise to the need for supplier benchmarking. In this process companies conduct in-depth research regarding suppliers’ market, changing dynamics, technology base, services, previous client reviews, and offerings, and compare multiple suppliers on the basis of these metrics. Utilizing this comparison, the company chooses the ideal partner for their business, subsequently discussing, negotiating, and signing contracts. As companies grow, the need for high-quality, fast speed-to-market, and other determining factors is imperative to maintain high market share, stay ahead of competitors, and overcome potential industry challenges. Supplier benchmarking is an imperative and helpful tool that enables unencumbered growth, sustainable partnerships, data-driven decision-making, and robust processes across industries. As companies prepare to enter the post-COVID era, the need for supportive, collaborative, and strong partners is high, and the hunt for best fit suppliers continues. Leveraging benchmarking can identify the right suppliers, mitigate risks, understand the market, and have many other significant benefits for businesses.
What are the Key Benefits of Supplier Benchmarking?
Cost-Efficiency: The process of benchmarking includes significant amounts of research, and acquiring a comprehensive understanding of the costs incurred, prices offered, and other expense related factors that impact suppliers and businesses. When conducting supplier benchmarking, companies can identify their ideal supplier with insight into the costs incurred and prices offered by them as well as competitors, and negotiate better terms or prices. Additionally, this knowledge can help businesses alter their procurement and sourcing plans to achieve the most cost-effective approach to acquiring and producing their products, and minimize unnecessary spend by closely evaluating the cause for every expense.
Higher Quality: With a proper supplier benchmarking process, companies can scrutinize the quality of the final product offered by each supplier. More importantly, the company can evaluate the quality of all raw products, technologies, processes, and other crucial contributors utilized in the process, to the identify their best fit suppliers. Gaining an understanding of the suppliers’ offerings can also help the company efficiently prepare their systems, processes, and production process to better fit the acquired products or services, and create an improved end-product. Benchmarking also helps companies continuously improve their offerings with insights into competitors’ offerings and changing technology trends within the industry.
Protect Brand Image: Many consumers are willing to forfeit convenience, short waiting periods, and low prices for high-quality, durable, and personable products or services. Ensuring that the product or service provided by the company is of high-quality and keeps pace with competitors in the market is imperative to making consumers happy. Identifying the right supplier, procuring high-quality supplies and products, and maintaining a healthy internal atmosphere leads to the ideal end-product, and provides consumers with a reason to maintain loyalty, pay higher prices, and make repeated purchases over time. Utilizing supplier benchmarking helps ensure that companies are partnering with their best choice, and protecting the brand image from being tarnished due to supply delays, low-quality offerings, unnecessarily high prices, or a lack of communication.
Improve Internal Processes: With supplier benchmarking, businesses identify the best option for themselves, leading to a more harmonious, understanding, and well-planned partnership. Research enables clear negotiations, data-driven strategies, clear contract management plans, stronger supplier relationships, and increased collaboration. When choosing between suppliers, companies must also compare their potential partners’ goals, identify the best fit suppliers in terms of company values, and select a supplier that collaborates, communicates, and cooperates. Having an alternative perspective, novel ideas, or joint collaboration can help create more structure and clarity, mitigate misunderstandings and risks, and enable improved performance, higher efficiency, and better deliverables. Suppliers play a crucial role in the functioning of procurement and sourcing departments and working closely with them can significantly improve internal processes.
Understand Market Dynamics: The benchmarking process demands a comprehensive understanding of the company’s market, and suppliers’ market, ensuring a better approach to strategizing, meeting market needs, matching industry benchmarks, and management. Another significant advantage to researching a market, is understanding various crucial dynamics that impact suppliers, businesses and consumers across markets, and capitalizing on opportunities. Through research during the supplier benchmarking process, companies can assess technology trends, changing costs and prices, upcoming growth drivers, major risks and challenges, and other significant dynamics, and how they impact their business and consumers. Additionally, with this information, companies can select suppliers that are privy to recent trends, prepared for all potential challenges, and strategically sound in the face of tumultuous market changes.
The retail industry is susceptible to significant fluctuations due to consumer demands, global trends, changing political and social scenarios, and other significant dynamics. For many companies, this directly impacts their requirements and expectations from suppliers, and often leads to a variety of challenges regarding procurement, sourcing, inventory, and supply chain changes. Similarly, a retail industry giant witnessed a steady decline in sales with rising awareness regarding sustainable solutions, environmentalism, and eco-friendly alternatives. Upon discussing with their suppliers, vendors, and stakeholders, the procurement department identified an inability to keep pace with the changing market due to their current partnerships. In their attempt to identify more flexible, collaborative, and relevant suppliers, they chose to partner with SpendEdge and leverage our supplier benchmarking solutions. With guidance from our experts, the company determined their ideal metrics and expectations for suppliers, conducted a comprehensive supplier benchmarking process in the relevant market, and identified their best-fit suppliers. Through this process, the company found flexible, fast-developing, trend-conscious suppliers, that worked closely with the company to achieve their targets, meet consumer demands, and keep pace with the evolving market.