What Is Supplier Management?
Tags: Supply Chain
If you regularly rely on a large group of supplier to keep your business running, you should be actively managing these suppliers. But what does this entail? What is supplier management, and what can it do for the company you operate? Here are a few answer to these vital business questions.
What Does Supplier Management Involve?
Managing your vendors is more than just finding them and setting up shipments. Instead, it's a proactive effort to measure their performance and ensure high quality at reasonable prices.
First, you must be able to select and form a relationship with high quality suppliers who can fulfill or exceed your requirements. Supplier management seeks to identify strengths and weaknesses in new vendors. This may include the vendor's financial stability, their ability to scale up or down, their rate of reliability, and how much they can provide throughout your operation.
Next, you'll need to manage the supplier's ongoing delivery of services. Your company might identify key indicators of good performance in their products and measure these on a regular basis. It may conduct quality assurance audits. You may also meet with vendors regularly to discuss concerns, improvements, innovation, or trends in the market.
Of course, if a vendor cannot meet your ongoing requirements, your company will need to manage their exit. How will you terminate contracts? Do you have new vendors in place to take up the work seamlessly? And what criteria might you use to restore a vendor to your supply chain?
What Are the Goals of Supplier Management?
Why should you go to the extra effort needed to proactively oversee suppliers? The goals of this process benefit the company in many ways.
First and foremost, good management is about reducing your costs and staying competitive. Unreliable suppliers cause delays in production or force you to purchase from others at less advantageous prices. Poor quality work could lead to customer returns, waste in production, or rework. And by partnering with a vendor over time, you can often avoid unnecessary price increases or poor contract terms.
Second, you want to ensure a good customer experience. If suppliers can't provide goods on time, you can't get those goods to customers on time. On the other hand, a proactive supplier who exceeds your timeline could result in a customer receiving their purchases early — and recommending you to others. And the more quality control you maintain, the less legal and financial risk you have.
Third, working with vendors helps you design a resilient supply chain that can weather changes. This is particularly crucial if you rely on 'just in time' inventory that has little room for breakdowns or delays. If you're in good communication with a regular supplier of certain parts and have an established backup plan, you'll know about changes in its availability early and can adjust quickly — ahead of the competition.
Finally, having vendor partners aids you in coming up with better ways to do things. You have a close relationship, and your vendors learn about your needs and your operation. Together, you can set mutually-beneficial goals and plan for the future.
How Can You Improve Supplier Management?
If your supply chain is at risk or has suffered problems, better vendor management could be the right path. The best way to take on this daunting project is to work with professionals. For example, you may not know how to define the key performance indicators for a particular set of products. Or you might need help setting up audits and quality control measurements. A pro can help with all these tasks.
At Group O, we offer supplier management as well as other services aimed at strengthening your supply chain and keeping down costs. Call today to make an appointment and learn more.