In this article, you’ll learn about why maintaining supplier relationship management is important to your procurement function.
Why Organizations Rely on Supplier Relationship Management?
In a volatile business environment, to increase the competency and add new competitive advantages, organizations rely on supplier relationship management. Having a healthy relationship with the suppliers, helps organization receive better service, procure efficiently, and maintain a sustainable relationship over the long run.
How to Successfully Manage Supplier Relationship?
Executing a supplier relationship requires organizations to gather supplier information, monitor their performance, and reward the chosen ones. Suppliers meeting their goals ensure existing relationship and also motivate the other suppliers to give their best. Supplier information is available in different parts of the organization, and procurement has no access to it. Because of that, a gap is seen, and procurement should improve it. The difference, furthermore, gives rise to management issues at the operational, functional, or strategic level.
What should be the Approach toward Supplier Relationship Management?
When implementing supplier partnerships, firms commonly take either a strategic or reactive approach. In the current business environment, firms are trying to migrate from a reactive approach to more of a strategic approach to establishing supplier partnerships. Generally, a strategic approach to collaborative partnerships looks at the entire supply base with a focus on improving specific supplier activities. Reactive, on the other hand, is often the result of dedicating resources to repairing problems after they occur. The strategic based process is market-driven and focused on improving the overall performance of the supply base.
As companies move toward a strategic based view of implementing supplier collaboration, having a set process can ensure success. The process must be flexible, considering the dynamic nature of the situation; however, it is essential to follow the outline to measure the success of the implementation strategy. This is where Supplier Performance Management (SPM) helps in providing the backbone to the alignment process.
An effective supplier, performance management program, not only encompasses risk mitigation but also helps in the prevention of problems. To learn about some of the positive benefits of SPM, click here.
Learn More: Vendor Management