Everything you need to know about Supplier Management

Supplier management refers to the processes that ensure that an organization receives maximum value for the money they pay to their suppliers. It’s vital for both the organization and the supplier to engage effectively and properly because these supplies play a very important role in the smooth running of an organization.

Communicating clearly with suppliers, managing the requirements and establishing a  strong relationship with suppliers is important to organizations, which means that organizations should have a comprehensive policy to manage suppliers.

Understanding how supplier management works

You might agree that in today’s world supply chains add up to make a large, complex network of trading partners and suppliers. Each of these suppliers and trading partners in a supply chain add value as they deliver goods and services to the marketplace.

It is pretty normal for most multinational and global enterprises to rely on thousands of suppliers. These organizations or enterprises make use of a supplier relationship management process to manage such a wide range of partnerships. Supplier management is the collection of processes that allow an organization to find, qualify, onboard, transact and work with the suppliers that best meet the needs of their business.

Importance of supplier management

It is worth noting that the success of businesses in the product delivery industry depends on their ability to obtain, retain and effectively work the suppliers to meet the expectations of the customers, quality products to be delivered in full and on time. So, basically, much of the organization’s value will depend on its relationship with suppliers.

However, as supply chains today can become complex interconnected networks, supplier management processes have also become increasingly complex, costly and time-consuming. Depending on paper-based, manual processes can worsen these challenges. Think about it, filling forms and making double entries of digital events is a slow process and if done manually, there would be an increase in risks caused by human errors and mistakes.

These challenges can be greatly heightened by chaotic times. It is true that relationships between an organization and its partners and suppliers are of critical importance when it comes to such challenges, especially because these relationships help maintain flexibility and agility within supply chains.

Supply chain leaders are dealing with these challenges by promoting digitization and modernization of supplier management processes. There are many different benefits of modernizing and digitizing supplier management processes, such as enhanced supplier verification, improved onboarding and better lifecycle tracking. As a result the supply chain relationship management would become more effective.

Advantages of effective supplier management

With effective supplier management, there will be an improvement in supply chain’s agility and the parties involved can respond quickly to new business needs, unexpected marketplace events and new strategic partnerships with the ability to find, qualify, onboard and manage new suppliers as quickly as possible.

One of the biggest advantages of effective supplier management is that it can help achieve cost savings. Not only can it help reduce costs, but also reach new levels of efficiency and productivity.

Additionally, effective supplier management can help reduce supply chain risk. 

Even in turbulent times, transaction blind spots will be eliminated and vendor disputes will be minimized.

Effective Supplier Management’s Key Features

Supplier collaboration, which refers to joint activities between the organization and the suppliers, especially in areas of cost management, process improvement, delivering raw materials, parts or supplies and product/service innovation.

Supplier onboarding, this is the process of identifying potential suppliers or vendors, assessing risks and compliance before integrating them to your network of supply chain. Supplier management processes help with finding and validating suppliers and having a strong relationship with these suppliers.

Supplier relationship management, which refers to procurement and supply chain activities that help build good, strong and mutually beneficial relationships with suppliers. The main goal here is to manage interactions that will help improve business processes between the organization and the suppliers.

Supplier lifecycle management activities can help manage external suppliers in an organized, transparent and integrated way. These activities include choosing and hiring suppliers, onboarding suppliers, administering payments, handling terminations, managing and enforcing contracts and more.

Supplier information management, which is the process of gathering, storing and applying data about the organization’s suppliers. The data collected will be based on extensive communications with those suppliers.

The future of supplier management

The future of supplier management is completely digital. The processes associated with supplier management continue to build on trust, transparency, machine learning to improve data quality, digitization to ensure information immediacy and optimize processes.

Supplier management will further extend to include more parties in the transactional processes, enabling all the active parties to work on resolving delivery disruptions. Moreover, businesses will be able to validate the legal and financial status of suppliers more quickly.

To deliver data easily and quickly in order to comply with trade and customs regulations. No need to spend long hours on completing repetitive paperwork and resolving disputes anymore. Supplier management will become even more effective as recent developments in Artificial Intelligence (AI) indicate that AI continues to learn and build knowledge over time based on the data received.