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5 Supplier Management Best Practices

Tuesday, August 06, 2019

5 Supplier Management Best Practices

Supply chain management is a crucial part of the processes of any large enterprise. Managing a global supply chain can be a daunting task. A hassle-free flow of information between two parties is the foundation of an effective business relationship. It is important to consider each facet of supplier management chain to derive greater value throughout the sourcing process.

Many organizations encounter difficulties in developing, implementing and operating partnerships.

Here are the key issues the suppliers encounter:

  • Too much focus on costs instead of value
  • Incompatible strategic objectives
  • Lack of specific SRM competencies and skills
  • No alignment between the business and procurement
  • Ignorance of soft skills in managing business relationships
  • Limited engagement
  • Lack of mutual understanding and empathy

To successfully achieve supplier management challenges, here are some essential tips.

A properly managed supply chain can create a competitive advantage for your business. The following best practices if implemented properly creates a strong competitive advantage for a firm in today’s dynamic market.

1) Setting Objectives Right

Supplier Management Best Practices - Setting Objectives Right

The key objective of effective supplier management is that it helps in reducing business procurement costs. The second most important objective is to ensure that there is a consistent flow of goods and services to the end consumer.

 

2) Cost Evaluation

One of the key goals of any supplier management system is to understand the costs associated with each supplier. One can analyse the cost associated with each supplier and compare it with that of other suppliers. This also helps in optimizing the cost of each supplier and who provides the best cost.

 

3) Following A Definite Process

Creating definite processes for supplier management is important for managing each of the suppliers effectively. The process once defined, must be adhered by both the parties. This helps in developing a business relationship that is mutually beneficial in the long run.

 

4) Service Level Agreement

A service level agreement is important for a successful buyer-supplier relationship. Having just verbal agreements can lead to higher chances of dispute or confusion later on. An SLA helps in resolving any issues that arise between a buyer and a supplier regarding cash flow or raw material. The document acts as a ready reckoner for dispute resolution, while it also acts as legal proof of the business relationship.

 

5) Information Management

Supplier Management Best Practices - Information Management

The faster the flow of information between the buyer and the supplier, the easier it will be to manage the inventory of goods and service effectively. One should ensure that all the requisite information is shared with the suppliers in a timely manner – so that they can make the deliveries according to the desired quality and standards.

 

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