Your essential guide to supplier management
What is supplier management?
Supplier management is a process of overseeing and managing interactions between an organisation and its suppliers. It includes activities from the initial enquiry through to contract, delivery and payment. The process allows organisations to manage their supply chain effectively — while improving efficiencies, reducing costs, mitigating risks, ensuring product quality and more.
Strong supplier management helps companies identify the right suppliers, develop contracts with them, regularly assess their performance, and drive constant improvement.
Why is supplier management important?
Supply chain agility
Effective supplier management makes it possible for companies to adapt quickly and efficiently to changes in demand or disruptions to supply.
Good supplier management helps companies manage their supply chains in the most cost-efficient way. For example, they may be able to negotiate discounts or more competitive terms with their suppliers for bulk or repeat purchasing.
By regularly assessing suppliers, businesses can gain a better insight into their overall performance. This allows them to assess and mitigate any supply chain risk.
Putting controls in place for supplier management helps organisations to maintain compliance and operate to the highest and most ethical standards. In turn, this helps to minimise business risk and maximise business potential.
What are 4 key steps of supplier management?
The first step in supplier management is qualifying. This is when businesses identify potential suppliers and verify whether they meet certain criteria, like:
policies and procedures around quality, work heath and safety, environmental impact
Once you have identified a supplier, you’ll need to onboard them. This process may entail:
formalising contractual agreements
integrating new suppliers into your company systems
introducing suppliers to key contacts within your organisation.
Collaborating with suppliers helps build strong relationships based on trust. This benefits both parties in a variety of ways. For example, you can work together to streamline processes to reduce waste and work together more efficiently and effectively. Furthermore, collaboration enables suppliers and companies to identify and prepare for emergent risks in the supply chain.
At this stage, you’re reviewing your supplier relationship to determine whether they’ve met all the established criteria. This includes analysing key metrics like:
average order fulfilment time
quality of materials
How to manage suppliers
Focus on relationships
When managing suppliers, relationship building should be high on your list of priorities – meaningful partnerships lead to better communication and understanding of expectations on both sides. Supplier relationship management helps businesses:
get the best price on materials
get expedited shipments to meet surges in demand
collaborate on ways to streamline processes.
Automate inventory management
Automated inventory management offers businesses improved efficiency and accuracy in supplier management. Inventory management software can maintain a real-time inventory count and automatically generate a purchase order to preferred suppliers when inventory falls to certain levels.
Set up electronic payments
Setting up electronic payments enables a streamlined payment process. It means businesses can limit manual paperwork and human error that comes with it.
In addition, electronic payments offer faster processing times and leave an audit trail so it’s easier to keep tabs on payments.
Review the data
When it comes time to renew your contract, review your data to determine whether your supplier relationship is still cost effective. But also consider the relationship you’ve built: Even if another supplier might offer the same product for a lesser cost, they might not provide the same level of customer service.
Strengthen your supply chain management with MYOB
MYOB is a business management platform that allows you to connect your supply chain, finances, customers, employees, projects, accounting and tax so you can gain visibility and control across all areas of your business. Manage suppliers and stock effectively, strengthen your supply chain, and lower your business risk with MYOB.
Disclaimer: Information provided in this article is of a general nature and does not consider your personal situation. It does not constitute legal, financial, or other professional advice and should not be relied upon as a statement of law, policy or advice. You should consider whether this information is appropriate to your needs and, if necessary, seek independent advice. This information is only accurate at the time of publication. Although every effort has been made to verify the accuracy of the information contained on this webpage, MYOB disclaims, to the extent permitted by law, all liability for the information contained on this webpage or any loss or damage suffered by any person directly or indirectly through relying on this information.