Supplier Management

Published June 2022

  1. Introduction

    Supplier or vendor management. Firstly, let’s define what it is:

    “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.” CIPS

    Supplier management includes the following domains. This article explains what falls within each of these domains.

    • Identifying and checking the fit of a supplier
    • Capturing supplier information and keeping this updated
    • Supplier orientation within the organisation and the processes involved
    • Communication flow to/from suppliers
    • Ensuring information is protected
    • Juggling the internal responsibilities
    • Supplier control/conformance after contract agreed
    • Enforcing price breaks
    • Enforcing policy
    • Change management
    • Ongoing risk assessment
    • Monitor suppliers and measure success
    • Conformance and continued monitoring/checking

    Whether you choose to manage these within your organisation or outsource to specialist groups, the principles apply to whoever is delivering on Supplier management and in assessing any supply partnership.

  2. Identifying and checking the fit of a supplier

    A lot of time can be spent identifying potential suppliers and evaluating their fit to your organisational requirements and culture. Shortlisting is often done before many checks are made on this fit. A mismatch can result in significant costs to an organisation.

    When engaging with suppliers it is important to present the key supplier capabilities that will be assessed and how they relate to the overall business activity. Including critical aspects of the engagement and impact on the business. Building good communication channels and trust with suppliers.

    Areas to consider here include:

    • Supplier has sufficient capability to deliver
    • Competition of suppliers considering numbers and any overlap
    • Political or Ethical considerations of the supplier
    • How they address sustainability
    • Willingness to conform to any company standards of governance
  3. Capturing supplier information and keeping this updated

    Managing and updating documentation is a key area of supplier management.

    This can however be challenging. Often at the time of contract, they are created and then they remain forgotten. However, things change, and suppliers should be requested to update conformance statements or sign off at regular intervals on documents that they have already submitted.

    In some industries this lack of up-to-date documents can affect supply or certifications, resulting in a disruption in supplying customers.

    Information includes addresses and phone numbers, tax forms, bank account information for processing payments, conformance documents, contracts, pricing schedules and more. You need a streamlined way to gather and store all this important documentation. Using email and manual entry is not efficient and as much as possible the supplier should be responsible for data entry of their information.

  4. Supplier orientation within the organisation

    New suppliers, changes in personnel and system processes all lead to a need for continuous re-orientation of all parties involved in supplier interactions.

    Feedback loops for employees and suppliers assist in this process, allowing failings to be highlighted and addressed.

    Areas of orientation include policies and governance, contact points and processes involved with procurement, payment, delivery and returns. Documents accessible to all parties assist in this process.

  5. Communication flow to/from suppliers

    Messaging and document exchange are core to any supplier communication process, with all transactions and documents needing to be stored relevant to projects and activities and kept up to date.

    An audit trail of such exchanges needs to be kept and made easily accessible for any queries or issues associated with deliveries.

    Consistent contact with your supplier avoids confrontational situations and disagreements. Therefore, it is critically important to openly discuss issues. Even where direct contact would be cost-prohibitive, you can still use automaton systems to check in on suppliers and provide feedback.

  6. Ensuring information is protected

    Security of data is fundamental, with clear isolation of supplier data specific to each supplier.

    Access to data needs to be appropriate to the user and any sign-off of specifications and pricing appropriate for the user. This includes secure messaging and exchanges of information.

    Leaving information unprotected opens the door to data breaches. If you are using a cloud-based software suite, then make sure that it is secure with all the appropriate security measures in place.

  7. Juggling the internal responsibilities

    There must be clarity of responsibilities associated with suppliers. These should not be passed around at a whim: they need to be consistent and clear, and any changes highlighted to all parties.

  8. Supplier control/conformance after contract agreed

    Manging suppliers post-contract is usually devolved across an organisation to those engaging more regularly with purchases. However, it is important that Procurement remains in control and is monitoring the performance of the supplier and is aware of any significant transactions.

  9. Enforcing Price Breaks

    Knowledge of contractual price breaks is often lost in processes and the people making the purchase decisions are unaware that there are such breaks based on the orders that they place.

    Often there are multiple parties, within an organisation, buying the same items, however, these are not aggregated to gain advantages on price or delivery.

    Ensuring price breaks are levered can be addressed in part through automation and in part by updating buyers at regular intervals relating to their specific purchases.

  10. Enforcing policy

    Organisational policies may be set, yet users and suppliers often do not know what they are or if they do know them, they may sideline them in the interest of speed of delivery.

    Check box documentation can be used as a method of confirming that specific process steps have been completed. Holding any purchases or deliveries based on completion.

  11. Change management

    Managing change of products and services, when processes are often manual and require direct engagement with suppliers, can result in chaos.

    Capturing and storing change information against suppliers, products and/or projects is essential.

  12. Ongoing risk assessment

    Assessing risk is often a process undertaken at the start of a relationship and repeated irregularly through direct engagement with suppliers.

    Risk needs to be assessed regularly and suppliers are obligated to update documents that gauge risk at regular intervals.

  13. Monitor suppliers and measure success

    Constant monitoring of supplier performance is important. Ensuring that everything is running smoothly and catching any issues early before they become critical.

    Measurements of success should be agreed upon at the start of the relationship. It is important to understand what constitutes success for your supplier so that you can address any failure to meet expectations.

  14. Conformance and continued monitoring/checking

    How your supplier conforms is an assessment that is often overlooked, with the assumption that if there are no supply issues then all is well. However, at the start of the engagement, the supplier agreed to conform to your ESG policies.

    Monitoring how your suppliers continue to operate within your ESG guidelines is important and needs regular review by both parties. Triggering these reviews is a critical part of any supplier engagement. Documentation for these reviews can be automated and simple check boxes used to ensure they are completed and not overload the supplier with documentation.

Take a look at Claritum's Supplier Management capability

Claritum Supplier Management Automation