Supplier Management Best Practices to Follow in 2021

Do you know effective procurement can enhance customer experience?

Look at it this way - unless you receive the goods on time, you can't proceed further. If the supplies are not delivered on time, it will result in late deliveries, which will affect customer experience and sales. So, while focusing on customer relationships, you have to focus on supplier management too.

Supplier management maximizes the business performance by automating all the processes. It streamlines the entire supply chain activities.

Let's understand what it means and how it works.

What is Supplier Management?

In simple terms, supplier management refers to all the processes and activities related to suppliers. It includes identification, performance evaluation, compliance, management, and contract negotiation.

Supplier management is the relationship between buyers and suppliers. Like CRM, it helps build a strong relationship with those who supply goods and services to your business. But there's a difference. CRM helps you connect with all the customers. Here, you can invite global suppliers to be part of your network and then filter them based on your requirements.

An effective solution helps you understand your investment and the output. Here's how:

  • You invite the global suppliers to be a part of your network.
  • Evaluation starts. Based on your requirements and their performance, you select the supplier/s.
  • You welcome them onboard, discuss the contract, and track their performance.

Well, you could say that this is easy and can be manageable. But is it? You need a supplier management solution. Let’s find out why.

Reasons to Invest in Supplier Management

The role of suppliers and vendors is not limited to supplying goods and services. It's about selecting the right partner, mitigating risks, and optimizing the entire process.

Today, all small and enterprise businesses are connected to international suppliers, which makes management complex.

So, to ensure that the relationships are well-maintained and nothing hampers the business process, having supplier management is essential. It helps manage the rapport in the long run.

You can get a better idea of what's happening in the supply chain. Identify the areas that need improvement, make better decisions, avoid disruptions, reduce risks, and even save costs.

A study by Deloitte found that businesses that invest in supply chains deliver 70% better results. And 79% of them report significant revenue growth.

Here are the benefits of implementing supplier management best practices.

Managing Supplier Base Efficiently

The supplier base keeps increasing constantly. As the business expands, the number may double, triple, or grow 10X. In that case, you can't keep sharing spreadsheets with all the suppliers or provide access to each and every one. It's time-consuming and may lead to miscommunication. Managing the entire workflow becomes complicated. But if you have a supplier management solution, you're already free of half of the tasks. You don't need to check the invites, proposals or manage the process manually.

Reducing Operational Expenditure

Procurement expenditures can sky-rocket if left unattended - look at the United Nations. They spent a total of $18.8 billion on procurement in 2018.

Following supplier management best practices can help identify the cost-saving areas and scrutinize the output quality. For example, you can take advantage of fixed pricing modules and cut the risk. Comparing the proposals can give you a better idea of pricing and value. These factors will impact the business in the long run.

Improving Financial Efficiency and Accountability

Supplier management solution reduces the risks of fraudulent invoices and third-party involvements. It streamlines the process and provides an in-house invoice and proposals feature for purchase and billing. As payments are done from the portal, it eliminates security threats.

Centralized Communication

The most advantageous thing about supplier management is that it provides a dedicated platform for communication. Apart from managing proposals, contracts, and stuff, suppliers can communicate with you via in-app chats or so.

They can check if the delivery is done without calling or checking their emails for confirmation.

This internal communication saves you and your suppliers from wasting time on emails. Do you know that people spend an average of 15.5 hours weekly checking and sending emails?

I am sure you don't want to spend 20 working weeks of the year on your emails.

Once you understand this and the reasons for using a supplier management solution, it will be easy to adopt supplier management best practices.

Supplier Management Best Practices

A structurally organized supplier chain can yield great results. Here are a few tips that you should follow to get the best results:

Encourage Self-Service

Nowadays, people like to solve problems themselves before contacting a support team. So, you can encourage your suppliers to solve their problems and learn more about your products by sharing data with them.

Using a knowledge base, they can read about the articles, FAQs, product information and watch training and video tutorials. This would give them a better understanding and help them come up with better proposals. Also, it would reduce the burden on your support team, considering you have a huge number of suppliers and customers to attend to.

Self-service will empower your suppliers and vendors. For that, it's essential to keep the knowledge base up-to-date with fresh content.

Formulate Business Requirements

Managing a supply chain is not just about finding the cheapest deal. You need to make sure that deal is business-driven. It meets your business requirements, follows the company strategy, has fewer risks, and delivers quality.

To make this possible, you and your team must share the business goals. Only when they know the business requirements will they be able to eliminate the mistakes in selecting suppliers or negotiating deals. Aligned business goals help measure the performance and make sound decisions.

Prioritize your Selection

Once you've collected the supplier invites and data, it's best to segment them based on specific criteria. It will help you prioritize the selection and relationships based on parameters. You can sort based on delivery time, previous history, compliance, quality of service, risk factors, etc.

Segmentation is necessary as it helps match with the suitable suppliers. A Kraljic Matrix is an effective way to deliver accurate segmentation. According to the matrix, you should map supply chains in two dimensions - risk and profitability.

Forbes Kraljic Matrix

Source: Forbes: Kraljic Matrix

Risk helps identify unexpected events, and profitability describes the impact of supply items on the outcome.

Once you've got the segmentation right, you can ensure that the supplier meets your business goals. The next step - move ahead and collaborate with them.

Keep Communication Intact

While collaborating with suppliers, ensure that they have understood your requirements. It will help them offer proposals that provide maximum value. Involve them in the decision-making process, consider their inputs and build a strong relationship with them. This strategy will help you make the supply chain efficient.

Implement a Solution

Bring in technology-driven solutions to automate the process and minimize communication gaps. For example, a supplier portal can speed up the entire sales channel. It can help you manage suppliers, redistributors, vendors, and brokers.

From invites to sharing data, adding comments, managing contracts, and tracking progress, you and your suppliers can make the most out of it.

Read: All About Vendor and Supplier Portal.

Monitor the Performance

Evaluate and assess the performance regularly so that your suppliers can deliver quality and on time. A transparent evaluation system can help you provide suppliers with timely feedback and prompt them to improve services.

Monitoring the performance will keep your suppliers aligned to the business goals, and compliance, and policies.

Evaluate and Mitigate Supplier Risks

Even after monitoring the performance, there may be some risks involved. So, to ensure that risks don't disrupt your entire process, identify the risks at an early stage. Check the suppliers, goods, services. Implement security protocols to shield you from disruptions. Train your team on how to act in these kinds of scenarios and make sound decisions.

Develop a risk assessment program that would assess suppliers and monitor the progress throughout.

Why is a Supplier Portal the Best Solution?

By implementing the best practices, you can optimize the supply chain. But, there are some supplier management challenges that you need to overcome. For example, you may have to add the entries manually for all the suppliers. Besides, you and the assigned team will be responsible for managing orders, invoices, and the entire supply chain.

But, with a portal, you and your team can be free of these tasks. Instead of managing your suppliers' data, you can let them manage it. You can focus on priority tasks like tracking supplier performance and ensuring the goals align with your business objectives.

How We Can Help You

We can help you with a ready-to-integrate supplier portal that streamlines the entire supplier management process.

CRMJetty Supplier Portal provides various features such as comparison of suppliers, invoices and payments, role-based access, and more. You can even request a customization or get your portal built from scratch.

So, don't wait. Bring in the portal today!

 

 

Get expert advice on supplier portal development. Schedule a meeting with us to learn more.

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