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. In this article we provide you with efficient and effective strategies to help your function grow.
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-
The first step in supplier lifecycle management is supplier qualification which decides if a supplier can fulfil specific requirements or not. Suppliers from around the world are invited to participate and then the best one is determined ton the basis of their quality standard.
Suppliers fill application forms and submit documents 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.
An effective supplier selection process leads to a great outcome. Supplier selection being a critical phase, its objective is to maximize the overall value and develop a long term relationship. It’s success depends on various assessment techniques that are both qualitative and quantitative.
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 helps a company spot supplier problems at an early stage and ensures to solve issues on time. Though tracking supplier performance across the global is complicated, but for better visibility, organizations must effectively follow supplier performance and identify the problem areas.
Another vital 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.
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.
The primary 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 more significant supplier contribution resulting into an organization’s performance improvement. For further information on supplier lifecycle management, you can always reach out to us!
Learn More: Vendor Management