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Supplier management

Supplier Management Best Practices: An Easy Guide for Businesses

Business needs have changed a lot over the last few years, resulting in shorter product lifecycles and wider market swings. As a result, supplier collaboration has emerged as one of the top strategies to elevate the performance of businesses to the next level. Suppliers of today possess detailed insights into market changes and have their fingers on the pulse of innovation, which will prove beneficial in today’s hyperkinetic business environment. But to gain value from suppliers, businesses need to understand how to better manage suppliers. Below, you will find the supplier management best practices for 2019 and beyond.

Supplier management best practices #1: Segment suppliers effectively

Businesses usually segment their suppliers based on their impact on the supply chain and supply market complexity. They classify suppliers into strategic, bottleneck, leverage and routine suppliers which many a time may lead to poor return on investments (ROI). By incorporating a third parameter that can help measure the compatibility between the organization and the supplier, companies can better manage their suppliers and achieve set objectives.  Also, this will help them to improve supplier relationship management, develop supplier-specific strategies, and improve collaborations with them.

Supplier management best practices #2: Develop a governance model

After segmenting suppliers, companies should develop a governance model that can track the relationship with suppliers from the beginning. This will provide clarity to businesses in understanding – who is in charge of managing the relationship with suppliers and when should a senior executive be involved? It requires resources from both buyer and supplier companies to ensure that the performance meets business objectives. In the case of strategic suppliers, the degree of governance will be more than transactional suppliers.


Supplier Management Best Practices: An Easy Guide for Businesses

Supplier Relationship Management

Leveraging Supplier Management Solutions to Reduce Part Costs for an Energy Company – SpendEdge

The Business Challenge

The company is one of the major suppliers of power generation services in the United States. Being a global energy major, the company felt the need to identify the right negotiation levers to drive cost reduction in direct spend by conducting a detailed analysis of various drivers of part cost. They decided to collaborate with SpendEdge and leverage their supplier management solutions to reduce purchasing costs and increase the efficiency of their supplier management process. The key challenges they were looking to address through supplier management solutions were:

  • Increase in purchasing prices: The company’s parts & repair business started witnessing an increase in purchasing prices of its parts due to poor supplier management process. This started eroding the contributing margins of the company and started creating challenges for the business.
  • Traditional methods: The client accepted “low-cost bids” in finalizing part costs and lacked the efficiency to defend the price requests from suppliers due to poor negotiation levers and supplier management system.


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How Supply Management Solution Helped an Industrial Materials Manufacturer to Reduce Inventory Costs – A SpendEdge Case Study

The Business Challenge

A process manufacturer of industrial materials based in North America had a business objective to maximize shareholder value of the company. Their prime focus was to improve profitability and asset utilization, with a productive P&L and balance sheet. The company’s products were on the edge of being commodities without offering much product differentiation from competitors. The primary means of gaining and holding market share was quality and this required them to enhance supply management.

Additionally, the company was vertically integrated and had limited sources of raw material in most of the major product lines.  This meant that the company often had to enter into long-term contracts with vendors to ensure supply and operate facilities to capture byproducts from other industries’ processes to obtain material. The quest for increased profitability compelled the company to engage with SpendEdge and determine cost reduction opportunities in every part of the company while improving the supply management process.

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Solutions Offered

The experts at SpendEdge worked closely with the client to analyze strategies and identify alternate approaches to provide a realistic assessment of risks and ensure that the client receives the best value-for-money. They consolidated suppliers within specific supply markets, reduced purchasing and supplier management costs and increased the efficiency of their supply management process.

Prior to this collaboration with SpendEdge, the negotiating opportunities didn’t exist for the client as they competed for material in the constrained marketplace, so vendor price negotiations and seeking of large-scale, free, value-added services were not considerable options. Moreover, all of the inventory was sold, and it was taking time to place it, which was resulting in poor margins for the client. SpendEdge’s supply management services helped the client to work with stakeholders without being tied to any one supplier. This helped them to identify suppliers who can offer the shortest lead time and the most competitive pricing among the available sources. The supply management strategy offered improved the production process and helped the client to

  • implement effective demand forecasting functions in the divisions.
  • establish documented procedures for forecasting
  • inventory planning and management.
  • production planning.

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Key Findings

In a span of six months, the supply management strategy devised by SpendEdge resulted in the reduction of inventory carrying costs by approximately $0.7 million per year on an investment of $200,000. The business process implemented further redesigned warehousing process and offered additional corporation-wide transportation savings.

Deployment of supply management strategy helped the client to gain detailed insights and change the supply management policy so that customers can receive continuous supply. This redesigned their customer service process and improved brand value by ensuring timely delivery of products. In addition, the supply management solutions lowered supply-chain costs and boosted their overall profitability.

How Does Supply Management Work?

Supply management is a business process that involves the coordination of pre-production logistics and inventory management. The key aspects of supply management are oversight and management. It involves oversight and management of suppliers and analyzes their contribution to the company’s operations. An effective supply management process includes:

  • Identification and procurement of goods and services that are crucial to a company’s ongoing operations.
  • Establishing supplier management process to improve relationships with suppliers.
  • Implement procedures that facilitate the procurement process.

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Supply Management: Improving the Business Cost Structure for a Sporting Goods Manufacturer

The Business Challenge

The client, a leading supplier of sporting goods with outlets spread across different regions in North America, was facing predicaments in ensuring the supply of materials and services. Their traditional process of obtaining and managing raw materials was inefficient, especially when it came to reducing their splurge and streamlining inbound logistics from different countries. This was resulting in substantial losses for the company and was also reducing their efficiency when it comes to improving the bottom line. The client, therefore, decided to collaborate with SpendEdge and leverage our expertise in offering actionable supply management services.

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Solutions Offered

By analyzing the current market scenario, risks influencing proft margins, and new market disruptions, the experts at SpendEdge focused on developing better supply management capabilities for the client. They conducted a comprehensive market research to obtain accurate real-time insights and determine appropriate supply markets for procuring products at the right prices.

The strategic approach adopted by our experts helped the client to take critical decisions related to suppliers. These decisions involved the identification and classification of capable suppliers, negotiation of the specific purchasing item, price, payments and volume, contracts, supplier development, and analysis of suppliers’ financial condition. Such an approach allowed the client to make better purchasing decisions while identifying key factors driving prices. Moreover, this highly focused approach helped the client to reduce two-third of its revenue, which was spent on buying goods and services, and enabled them to select appropriate suppliers.

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Key Findings

Implementing SpendEdge’s supply management strategy helped the client to obtain detail information on supplier landscapes from specialized databases and prime cost benefits associated with them. This helped them to select the best cost sourcing locations and understanding prime cost advantages. Furthermore, the strategy helped the client to reduce excess spend, make efficient use of resources, and improve the business cost structure of the company.

What is the Importance of Purchasing and Supply Management?

Since organizations are spending more than 50% of their turnover on supplies, purchasing and supply management is becoming crucial for companies to stay competitive. They need to select and manage their suppliers efficiently to ensure the timely supply of materials and services to meet companies’ strategic plans and add value to their businesses. With a potent supply management strategy in place, companies can identify the needs of an organization and get the most profitable agreements in place. Additionally, a proper supply management system helps companies to avail the goods at the best prices while maintaining a cordial relationship with suppliers.

Ensuring the smooth supply of goods and services can be a taxing job for companies. Contact our offices below  and know how our supply management solutions can help your organization to address such issues.

Six Effective Ways to Build Better Supplier Relationship Management

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. 


4 Effective Strategies to Make Strides in Supplier Relationship Management

Supplier relationship management (SRM) is an integrated approach that addresses and provides benefits for both the buyer and seller sides. It should be noted that not all suppliers are the same, so not all customer-supplier relationships should be dealt with through a single strategy. The typical goal of supplier relationship management is to streamline and improve processes between a buyer and its suppliers. It is all about developing a mutually beneficially relationship with suppliers, especially those deemed as most strategic to the brand, to promote quality, efficiency, and innovation among several other benefits. As with many procurement activities, at the most basic level, supplier relationship management can be used to reduce both prices paid and costs to the organization. Developing appropriate styles of interaction can also make it is possible to save money. The key to developing an effective supplier relationship management approach is a well-understood supply base.

Strategies for better supplier relationship management

Leverage technology

Investing in a good supplier management software helps companies keep track of information about their suppliers in one place. Companies can also take one step further and install an advanced purchase order management software which is useful in creating, processing, and tracking purchase orders with the suppliers.

Ensure timely payments

Fulfillment of payments on time is a vital element of an effective supplier relationship management. This is also a critical step in ensuring that the company’s valuable suppliers are not lost. Timely payments also facilitate companies to establish their credibility and reliability as a customer to their suppliers. Just like companies like to receive prompt delivery of goods and services from the suppliers, the suppliers expect prompt payments. In case companies are unable to make payment on the date agreed, then they must inform the supplier as soon as possible with the date on which they can expect the payment.

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Make detailed agreements

Supplier relationship management is a non-negotiable in the case of companies that buy from a vendor on a regular basis. Begin by listing out what both parties expect from the partnership such as item or service description, price, delivery terms, payment terms, and communications. Then have both parties sign it. The complexity of this document depends on the business requirements. A well-documented supplier relationship agreement reduces the possibility of confusion or disputes and paving way for better supplier relationship management.

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4 Vendor Management Best Practices That You Must Know

Vendor management is gradually becoming one of the core competencies for successful enterprises. It is a critical element for businesses to build a relationship with their suppliers and service providers and will consequently strengthen their businesses. Furthermore, selecting the right vendors is often critical to any company’s success. Bad vendor management systems and disorganized relationships can result in performance interruptions and even ruined reputations. Therefore, the need to adopt vendor management best practices comes into the picture. Let’s examine some of the vendor management best practices that will help organizations create a mutually beneficial relationship and advance the organization’s goals. 

 Vendor Management Best Practices

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#1. Carefully examine the options

Some industries might have only a handful of vendors to choose from. However, in most cases, there is no shortage of market competition and it is important for companies to do their homework before making their decision. Businesses must first assess their needs and narrow down potential vendors based on the pertinent criteria. Carefully examining the options is one of the vital vendor management best practices for companies. Some companies may require multiple vendors to fulfill their needs, but consolidation reduces confusion and will likely allow for cost savings.
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#2. Balance commitment and competition

One of the key aims of having a vendor management system is to gain the commitment of the vendors to assist and support the business operations. On the other hand, the vendor tends to expect a certain level of commitment from the company. It does not enterprises must blindly accept the prices they set. One of the key vendor management best practices is to gain competitive bids.

#3. Provide insights on current and future trends

Vendors and organizations depend on each other to thrive in the market. Therefore, providing insights on current and future trends is one of the key vendor management best practices. Companies must analyze their vendors’ experience with other companies, have an in-depth knowledge of the industry, and use these as inputs while strategizing and optimizing the vendor management system. Moreover, vendors manage multiple clients and companies haven’t built rapport with their point of contact, chances are that they could miss out on new developments. As vendors evolve and add more services, capabilities, or offerings organizations have to be aware of what’s new in the market. Vendors must be informed that the company wants to be included on these types of announcements.request proposal

#4. Share information and priorities

One of the most important vendor management best practices is to share information and priorities with the vendors. Vendor management best practices provide only the necessary information that is required for the vendor to serve your needs better. It may include new product launches, limited forecast information, and changes in design and expansion or relocation changes.

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Supplier Management Process: Steps to Select the Right Supplier

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. BContact USut before talking about those steps, let’s understand a bit about supplier management process. (more…)

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