Are you getting the most out of your suppliers?

Published September 2015

Managing suppliers can be difficult and time consuming. In today’s rapidly changing world companies need good suppliers more than ever.

Supplier managers face many challenges such as needing to find way’s to find new suppliers quickly and easily. They need to be able to mitigate risk and monitor and identify poor performing suppliers.

Traditional model of supplier management

To fix this problem the traditional and often used model of supplier management is to implement a set of initiatives which focus on standardising processes and reducing prices. This is often achieved by squeezing a supplier to provide the company with the lowest price and forcing suppliers to compete in increasingly less rewarding environments. Squeezing a supplier could be counter productive and lead to both a poor relationship and ultimately poor quality goods and services. In this model quality is often sacrificed and good purchasing isn’t just about getting the lowest price. When companies switch suppliers, it is often driven by the fact that a supplier is seen as providing poor service or performance. Traditional supply chains often rely very heavily on manual procesess. Forms in word or excel capture the orders and define requirements. Handwritten forms are not as useful as interactive forms which can capture data more effectively for generating reports and analysis. Manual processes are useful as a stepping stone towards the ultimate goal of automating the buying process. Unfortunately too many companies implement manual systems and persist with them when they have outlived their usefulness. Manual processes are limited, they can be time consuming to maintain. It can be difficult to get employees to follow the process correctly and so standardisation can be difficult to achieve. Extracting data in the form of reports can be difficult especially if the forms are handwritten or if the spreadsheets are not designed with this purpose in mind.

Getting the most out of your suppliers

This model of supplier management is all about developing good business relationships where everyone benefits. Some of the most successful organisations in the world (such as Amazon) have made the building of their supply chain the basis of their business. It is even possible to argue that in the future business competition could exist soley between supply chains rather than between individual suppliers. In this model there is an acknowledgement of responsibility on both sides and an ethos where both parties can prosper and benefit. Whilst there are undoubtedly some suppliers that are overcharging for their services and not providing a good service, most suppliers want to do a good job. They want to provide a service that has happy repeat customers and are genuinely trying their best to achieve this, it is in their interest to do so. They can only do this if buyers remove the greyness from the buying process and provide very clear instructions about what, where and when they want a product or service delivered. Good supplier management requires effective comunication. Suppliers need your expectations to be clear to them so they can provide the service that you require. How can this be achieved?

Implement Enterprise ERP

Many companies choose to implement an enterprise level ERP system. However, there can be a very lengthy supplier on boarding process, we have heard of cases where the process to implement enterprise level ERP systems literally took years to implement. The IT department will need to be involved as the process involves installing software on individual computers. The process of implementing this kind of system can in itself cause a lot of additional admin and extensive costs, all of which can be off putting.

Implement a Cloud Based Spend Management Platform

Cloud based spend management does not require the involvement of the IT department as there is no software to install. The platform is accessed via the internet meaning that it can be accessed at an time of day and from any location. Finding new suppliers – a good platform should allow you to easily onboard your suppliers. You should be able to profile your suppliers and segment them by capability, location and performance. Interactive web based forms capture orders – This fixes the greyness problem by ensuring that all parties are involved in a clearly defined automated buying process. Compliance to best practice is achieved more easily as checks and balances can be enforced.

Supplier Rating Systems

Some platforms (like Claritum) have built in performance ratings systems. These allow buyers to rate suppliers on a job by job basis. This means that problems with suppliers can be highlighted much more quickly. Rather than waiting for a yearly review when a supplier finds out it too late to fix the problem of where it has been going wrong, a supplier can see from the platform that it is not performing well and address their performance.

Managing Risk

Create alerts based on new information from suppliers and changes in status (eg publication of financials, lapsing of accreditations and contracting information) Suppliers can manage their own profiles and updates, meaning the supplier manager doesn’t have to do this. They can also share innovations such as notifying customers of new products and promotions.

Reporting capabilities

A good platform will include the ability to track both sides of the buying process and ensure that both parties are accountable. This means that if a supplier consistently delivers late this will be recorded and reported on so it will be easy to identify which suppliers are proving a problem. The system should also be able to identify where in the process problems are occuring, so if the supplier is delivering late because the buyers have held up the process, this will be highlighted. Not all cloud based spend management platforms are created equal so make sure the sytem you choose has all the features you require and you should be able to start getting the most out of your suppliers. If you'd like to find out more about Claritum then Book-a-demo and we can chat through your needs and show you the platform.