Supplier management is the relationship formed between a buyer and supplier, subject to the criticality of the goods or services being purchased and supplied into your organisation, determines the type of working relationship that you should look to form with your suppliers. Supplier relationship management is a core soft skill for all procurement and supply managers.
How Do You Manage Supplier Relationships?
To manage a supplier is to assess their capability to meet your contractual needs, to measure their performance during the contracting period, to work with them to identify challenges whilst looking to improve the working relationship, ensuring you have the right levels of contact to ensure that the relationship remains on track for both parties, in order to get the best from the working relationship.
What Are The Benefits of Supplier Relationship Management?
To successfully manage appropriate relationships it is necessary to look at them from a practice stance. By breaking down the relationship into process steps, then the role of procurement is to measure success based on the ability to deliver business outcomes.
This in turn leads to benefits within the relationship in the form of:
- Price reduction – Working collaboratively and sharing forward forecasts can open discussion to remove cost from the production process or any other areas of the supply chain
- Cost information exchange –Buyer/Supplier discussions around total cost to deliver the goods or service, consideration for alternative components/specification variance, inventory reduction and other areas of cost saving, whilst still achieving performance specification
- Technology or innovation exchanges - The supplier may share innovative developments or new market offerings
- Improved or priority service levels – Highly regarded customers are often offered priority production availability, or based on the scope of work and security of the relationship, suppliers may even consider investment in developing their production capacity to meet increase customer demand
CIPS Knowledge-related topics, best practice guides and white papers include: collaborative working, managing supplier performance, supplier development and diligent procurement.