Hot on the procurement agenda: Supplier Relationship Management
Many businesses struggle to manage their supplier relationships properly, due to limited visibility of their supplier’s activities, making it hard to collaborate. Find out how getting a 360° view of your suppliers can help you drive positive supplier relationships.
Managing supplier relationships strategically is a roadblock faced by many procurement teams. With businesses relying on thousands of suppliers on a daily basis, it’s a challenge trying to ensure these suppliers are fully compliant and operating according to the required standards. Managing supplier relationships strategically is a roadblock faced by many procurement teams. With businesses relying on thousands of suppliers on a daily basis, it’s challenge trying to ensure these suppliers are fully compliant and operating according to the required standards.
We have seen numerous cases where procurement has been thrown under the spotlight, due to a non-compliant supplier or negative situation arising based on a supplier’s defective processes or behaviours. A very recent case being the Dutch contaminated eggs found in leading British supermarkets, which led to the eggs being removed from supermarket shelves. This case posed serious questions about how the eggs were procured, what feed the chickens were given, how the feed was grown, and why there wasn’t the necessary measures and controls in place to prevent this situation from arising.
This case, along with Samsung’s exploding phones highlights the need for procurement to better manage supplier performance, relationships and everything pertaining to a supplier more closely, putting suppliers at the top of the procurement agenda.
In fact, even our own recent research of over 250 procurement managers found:
- 44% of businesses would like to manage their suppliers more effectively, with technology playing a central role
- The top 2 procurement roadblocks facing businesses today relate to ineffective supplier management
It is clear businesses aspire to get better at managing suppliers, and it’s a top priority for procurement, but without the right tools to enable them to do this, it becomes another procurement objective that isn’t achieved!
However, with the correct Supplier Relationship Management (SRM) technology you can achieve your goals, as it enables you to centralize all your supplier related processes, helping you get a grip on your suppliers!
So, what steps can procurement take to drive best practice?
- Score and segment your supplier base
Getting a clear picture of which suppliers are crucial to your business operations is a great starting point, because once you’re aware of how each supplier impacts your business, you can begin collaborating with each one accordingly.
By using SRM technology you can easily create and run questionnaires to collect key data about your suppliers and how they work with you, and based on the information they submit, the system will automatically score your suppliers and put them into bands. These scores and bands can then be applied to your supplier base, to help you tier them and make real-time comparisons of which suppliers are crucial to your business. Being able to segment your suppliers by tiers quickly helps you identify which are your tactical and strategic suppliers, so you can create a proportionate plan for managing supplier’s dependent on their segment profile, and importance to the business.
- Hold regular and fully audited review meetings
A breakdown in communication with suppliers is a common challenge facing most businesses, because without a formal structure in place to communicate or meet face to face with suppliers, it can be difficult to develop positive relationships. And, with minimal tracking of phone, email and other communications sent to or received from suppliers, it becomes near impossible!
However, by taking advantage of the right SRM technology, you can track everything from an email sent to a supplier to an outstanding action from a supplier review meeting.
Using online SRM tools you can schedule meetings with any of your suppliers, conduct quarterly reviews and set targets and objectives, with everything being tracked online. Since a record of every communication between your supplier and you is held online, you will automatically receive notifications when your next review is due and if an action is still incomplete. Face to face meetings and regular communication with your suppliers can then be used to drive positive relationships and mutual benefits, especially with your tier 1 and 2 suppliers.
- Keep track of supplier KPIs and metrics
Managing suppliers is easier if you have instant access to key data relating to them and can track their performance levels. As you rely on suppliers to keep your business running smoothly, your business can only operate at optimum levels if you’re working with suppliers who are adhering to your required standards. However, with most data relating to suppliers being stored offline in Excel or Word files, filing cabinets, or spread across several locations, it’s hard to keep track of which supplier is operating at the required standards and performing well.
With SRM technology you can append all your supplier KPI documents to the relevant supplier, set key milestones, and invite your suppliers to participate online by providing updates on how they are progressing on set KPIs. Your suppliers also have the option to submit terms and conditions, financial data and other core data via the system. You can also set dates for when core data is nearing expiry, so your suppliers receive automatic prompts and alerts to submit the latest information. Since the information is submitted online, it’s readily available to procurement and the wider business.
Taking the above steps will help you build a 360° view of your suppliers, which can be used to leverage and drive positive relationships with suppliers. The more you know about your suppliers the better!
Why not download our Medius Supplier Relationship guide? It includes best practice on what good supplier relationship looks like.
