8 Unique Phases of Supplier Life Cycle Management
With suppliers at the heart of procurement, every aspect related to a supplier is key to successful collaboration. Managing these aspects forms the core of supplier lifecycle management that successful organizations focus on. If you ask what steps or mantras do mature procurement organizations follow to maintain their supplier lifecycle management or how can companies improve the efficiency and effectiveness of their supplier lifecycle management, we’ve got you covered!
The purpose of supplier lifecycle management is to recognize the right supplier and get better value while reducing associated cost & risk by ensuring the quality throughout the cycle. Supplier lifecycle management has eight unique phases as discussed below-
- Supplier Qualification: the first step in supplier lifecycle management is supplier qualification decided on if a supplier is capable of fulfilling the specified requirement or not. Suppliers are invited to participate from across the globe to find the eligible supplier to determine if they can provide the goods or services to the company’s standards.
- Supplier Evaluation: Suppliers fill application forms and submit documents to for the evaluation process. Depending on the supplier’s cost of quality, cost of doing business, and other financial & economic aspects, the evaluation determines the onboarding. Other methods to evaluate suppliers include questionnaires, scorecards, site visits, etc.
- Supplier Selection: An effective supplier selection process leads to great outcome. Supplier selection being a critical phase, its objective is to maximize the overall value and develop a long term relationship. Supplier selection relies on various assessment techniques that are qualitative and quantitative in nature.
- Supplier On-boarding: It is necessary to collect supplier information to make the working relationship transparent. Once the supplier is on-boarded, the organization can track updates on supplier information & performance.
- Supplier Performance Management: Supplier performance management helps a company spot supplier issues at an early stage and ensures issues are solved on time. Though tracking supplier performance across the global is complicated but for better visibility, organizations must effectively track supplier performance and identify the problem areas.
- Supplier Risk Management: Yet another important phase of the supplier lifecycle management is to identify supplier risk at the supplier base to prevent disruptions. Risk management is among the most critical duties of procurement and yet the most overlooked. Risk management is essential for a successful business.
- Supplier Development: It is the process of collaborating with suppliers to improve their process and manufacturing capabilities. Supplier development comes into picture when a supplier’s performance is not up to the mark. Giving supplier regular feedback about their performance improves supplier base.
- Supplier Relationship Management: The main purpose of SRM is to develop a mutually beneficial relationship that delivers a higher level of competitive advantage and innovation. SRM promotes collaboration between parties resulting in lower costs, reduced risk, better quality, and greater efficiency.
Supplier lifecycle management is not an unachievable feat. It already plays a significant role in defining an organization’s success. Taking a supplier-centric view of procurement and supply chain drives greater supplier contribution resulting into an organization’s performance improvement. For further information on supplier lifecycle management, you can always reach out to us!