An organized approach to assessing suppliers’ contributions and their influence on success comes under the supplier management system. As part of this strategic process, tactics are determined for maximizing the suppliers’ performance by implementing decisions. In a supplier management system, there are three hierarchical steps involved.
These steps are-
- Supplier Segregation: The suppliers are differentiated based on the risks and opportunities involved.
- Supplier Strategy Development: Developing strategies for optimal interactions with the suppliers based on the targets and needs of the business.
- Supplier Strategy Execution: The devised strategies in the previous stage are executed to achieve the results that are envisioned by the business.
The Importance of a Good Supplier Management System:
Purchasing is a key aspect of any business. A conflicted relationship between the supplier and the business can lead to a loss of time and money for both parties. Therefore, creating and maintaining good supplier relations will be profitable in the long run.
The primary goal of a supplier management system is to streamline the process between the buyer and the seller. This results in mutual benefits for both parties and results in a longer and more successful business.
The Benefits of a Mature Supplier Management System:
Modern and diverse businesses deal with numerous suppliers, making the supply chain more complicated than ever. Added tasks of cost-cutting to gain consumers also make the relationship between the business and the suppliers very tight. Indulging in good supplier management practices can benefit you in the following ways:
- Effective Procurement Process: A better supplier management system allows communication sharing ideas and feedback. This would ultimately lead to lowered costs. In the past, most of the emphasis was given to customer relationships.
However, businesses are understanding the increased need for a better relationship with suppliers. By maintaining good relationships positive outcomes such as increased return on investment, increase in market share and shortening order fulfilment time can be achieved.
- Reduction in Cost: Good supplier relationships leads to longetivity. Having constant suppliers are cost-effective in comparison to finding new suppliers in short periods. Good relations with the suppliers would save money for the business in the long run. Furthermore, the qualitative benefits like availability, timely delivery and assured quality are also gained by having strong relations
- Strong Supply Chain: By working together, both the suppliers and the business understand the inner working of each other. This mutual understanding allows adaption from both sides when necessary. This also allows the buyers to have a few, but strong suppliers that would ease the experience of doing business.
How to Enhance Supplier Relationships:
Here are things that can be done to ensure improved and lasting supplier relationships:
- Efficient Communication: All the necessary information has to be communicated by both parties to build trust and confidence. Having solid lines of communication would help to avoid misunderstandings and future problems would be solved easily.
- Respecting the Terms of Business: Doing business by staying true to the terms agreed upon is the first sign of mutual respect and understanding.
- Consistency: Being consistent with promises and being regular for important events such as meetings and business calls go a long way.
Business in modern times requires an efficient supplier management system to stay ahead in the industry. Researches have shown that companies with a sophisticated supplier collaboration can outperform their peers by twice the margin of growth in innovation and other metrics.