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As a procurement professional, the management of your suppliers defines the success and downfall of final delivery to your end customers. Your suppliers play a crucial role in maximizing value to your organization and your customers, therefore it’s important to demystify and understand the supplier management process. This process includes managing vendors across the organizations, and working collectively with them, while keeping a check on compliance.
Let’s dive into the process deeply by looking at these simple six steps that will guarantee supplier management success for your organization:
1. Define your goals and objectives:
The first step in the supplier management process is for you to sit down with your team and define the purpose of working with these suppliers. You must identify the need for suppliers and discuss how these needs will be met by third-party vendors. You must make sure that the defined goals and objectives of employing these suppliers must be in tune with your organization’s overall goal and objectives.
Read our blog on: Supplier Management–Benefits, Process, & Best Practices
2. Qualify Suppliers:
Once you’ve defined your goals, you now have a purpose for continuing this process. The next step of this process involves qualifying suppliers. This step determines if the suppliers are capable of fulfilling your company’s needs effectively and efficiently. You must compare the supplier’s offerings with your product standards to evaluate and qualify vendors.
3. Classify and Segment Suppliers:
Once you’ve qualified suppliers, it’s important that you classify and segment your suppliers into specific quadrants based on carefully chosen relevant metrics such as risk, supplier quality, compliance, profitability, and performance. These metrics will help you evaluate and score each supplier’s strengths and weaknesses which in turn allows you to rank your suppliers.
4. Supplier Selection and Negotiation:
Once you’ve scored and ranked suppliers, you now reach the step where you must select suppliers that qualify, score high on pre-defined metrics, and match your goals and budgets. Once the suppliers are selected, it’s time to involve your finance and legal team which will help you thoroughly negotiate the terms and conditions of the contract with your suppliers which includes timeframes, performance metrics, compliance needs, and delivery time.
Here’s a guide to 11 successful tips for winning supplier negotiations
5. Collaborate with Suppliers:
It’s extremely important to build meaningful relationships with your selected suppliers . Once you’ve selected your suppliers, it is crucial to effectively collaborate and communicate with your selected suppliers on a timely basis. You must work on creating a seamless communication flow which allows the mutual sharing of expectations.
6. Supplier Performance Evaluation:
Supplier selection and collaboration don’t mark the end of your supplier management process! It’s important for you and your team to frequently evaluate suppliers’ performance against pre-defined indicators. You must also make regular compliance checks to make sure the terms of the contract are being followed by the selected suppliers. We suggest creating thorough Key Performance Indicators (KPIs) to measure supplier risk and performance. In case of any anomaly, communicate with your suppliers and come up with a joint plan for improvement and optimization.
In conclusion, the success of the procurement team hinges on their ability to effectively manage suppliers. Demystifying the supplier management process is essential in ensuring that your organization not only meets its goals but also maximizes value for both it and its customers. By following the six key steps outlined in this article, you can pave the way for supplier management success.
If you’re interested in learning more about how Zycus can help streamline your supplier management process, consider booking a demo with our experts.
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