Numerous forces drive your organization’s need for visibility across supplier activities. Global demand and supply chain networks naturally include distance, cultural, time-zone, tariff, geopolitical and other types of challenges when working with suppliers. As a result, it’s difficult to discover qualified suppliers, effectively collaborate with suppliers and quickly respond to unexpected supply events.
Benefits of Collaborative Supplier Relationships
Increasingly, organizations are realizing the benefits of tightening relationships with suppliers to better manage the sourcing and procurement of goods and lower supply costs. Collaborative processes transform a typical transaction-based association with suppliers into two-way access and mutually beneficial relationships. This builds a more effective and longer-term partnership that lowers inbound supply costs and improves supplier performance. In many cases, companies are relying on digital technology and supplier management software to transform relationships with suppliers.
The Role of Supplier Relationship Management (SRM)
Many companies still rely on outdated processes or fail to understand the role supplier relationship management (SRM) plays in maximizing supply chain performance. Organizations that have already boosted supplier management efforts are now able to more accurately select suppliers, quickly onboard suppliers and better communicate with key suppliers.
Challenges in Supplier Management
Going forward, having the right supplier information and supplier relationships is going to be increasingly important in meeting customer expectations and gaining competitive advantages. Organizations we work with often mention the desire for a single source of truth that improves decision making with suppliers based on the same set of information. Along with the global and swiftly changing nature of sourcing, inbound supply challenges include:
- Carrying excess inventory to address potential supply disruptions
- Excessive premium freight charges to meet customer delivery expectations
- Inefficient sourcing and supplier onboarding efforts
- Mismanaged documents and processing errors leading to slow cycle times
- Ineffective supplier discovery and qualification
- Buyers spending too much time “fighting fires” and addressing unexpected supply disruptions
Gather Vital Supplier Information Sooner
Procurement professionals typically start sourcing projects by researching the applicable spend category and suppliers with a spend analysis effort. So, we can not truly say that the sourcing process begins with supplier management. Even when the spend analysis is diligently maintained, the associated supplier information primarily pertains to purchase details such as timing and originator, rather than vital supplier attributes like OTIF performance, ESG performance, quality metrics, financial stability, and other crucial factors. Essentially, this information sheds light on your company’s procurement patterns rather than the qualities of the suppliers themselves. To enhance sourcing decisions, your procurement team must acquire a comprehensive range of supplier information early in the sourcing process. This preliminary step is essential for filtering out unsuitable suppliers and is where supplier management software or SRM software proves invaluable—providing a structured and digital approach for collecting and analyzing supplier data.
Reap Business Benefits through Collaboration
Successful supplier management and collaboration relies on transparency and aligned objectives with supply trading partners. Collaborative processes provide a foundation for a responsive and flexible supplier network that responds instantly to market volatility and changing customer demands. With greater connectivity and collaboration with suppliers, your organization can achieve business benefits that include:
- Reduce inventory investment without risking material shortages and downtime
- Eliminate processing errors by replacing manual methods with digital communication
- Reduce COGS and lower indirect procurement costs
- Boost contract compliance and reduce contract leakage
- Mitigate supply risks
- Improve supplier performance
- Simplify supplier onboarding, qualification and classification
- Enhance supplier ESG compliance
Build Long-Term Partnerships with Suppliers
Acquiring accurate and timely supplier information holds significance beyond enhancing procurement decision-making and optimizing sourcing procedures. The impact of effective supplier information extends to your supply partners, as it prevents inadvertently involving unqualified suppliers in an RFP, thereby sparing your suppliers from unnecessary costs and preserving existing partnerships. This principle applies equally to suppliers already bound by contracts. Relying on outdated or incomplete data for decision-making can lead to inaccuracies that unjustly tarnish a supplier’s reputation. Most importantly, a lack of comprehensive insight into a supplier’s capabilities deprives them of the chance to contribute to your company’s success while rightfully benefiting from it. Leverage supplier management software and a systematic approach to build long-term and lasting relationships with your suppliers.
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