Introduction
Globalization has changed the business dynamics significantly. Today, businesses must interact with different suppliers to handle the supplies of products, services, and business operations. That’s why there is a dire need for effective supplier management to handle all aspects of the supply chain efficiently.
In this article, we will cover everything about supplier management, including its importance, process, and benefits. In addition, we will also discuss how to modernize and automate supplier management with a BPM (Business Process Management) tool.
What is supplier management?
Supplier management is the management of all business processes and activities that are involved in the entire lifecycle of a supplier. It includes, but is not limited to, identifying, qualifying, acquiring, and managing suppliers that facilitate the business in its operations.
Although supply management is about purchasing goods/services and other business-related resources, supplier management is about managing the relationship between the supplier and the business. Therefore, the core purpose of supplier management is to ensure that all aspects/contracts with suppliers are in place and properly managed to have smooth business operations and growth possibilities.
Why is supplier management important?
The fast-paced globalized economy is demanding businesses to diversify their supplier base. Moreover, the emerging customers’ demand for high-quality products and timely shipments are also urging businesses to work with the best suppliers. All these elements are diversifying the supplier base for businesses.
Consider an e-commerce clothing brand as an example. This business interacts with multiple suppliers, including the manufacturing partner, shipping provider, IT service provider, marketing agency, and much more. To manage all these suppliers, the brand needs a well-structured supplier management system.
With a proper supplier management system, a business can oversee and coordinate all its suppliers efficiently. This leads to proper onboarding, effective communication, streamlined lifecycle management, and increased possibility to identify improvement areas to reduce cost and improve quality.
Overall, the purpose of supplier management is to identify the right suppliers and maximize value/relationships, along with reducing cost and risk by ensuring quality during the entire lifecycle.
Supplier management process
The supplier management process is an amalgam of multiple steps and activities carried out continuously. Below are the main steps involved in a supplier management process:
1. Supplier identification
The first step in a supplier management process is supplier identification. In this step, businesses begin searching for potential suppliers that align with their business needs. So, they create a list of potential suppliers at this stage.
2. Supplier qualification
After identifying potential suppliers, the next step is to evaluate them based on cost, quality, production capacity, etc. In this step, businesses pick the supplier(s) capable of providing necessary and quality resources.
3. Document management
After finalizing the supplier and completing the negotiation, the next crucial step is proper document management. It is important to document agreement terms and conditions, contractual details, pricing, delivery schedules, and all other crucial details. Moreover, proper documentation helps to ensure transparency and compliance.
4. Supplier relationship management
Throughout the supplier’s lifecycle, businesses must maintain a strong relationship with their suppliers. This not only involves clear communication but also requires a healthy working atmosphere of mutual trust, knowledge sharing, and collaborative growth. Therefore, another crucial activity in supplier management is to ensure a strong supplier relationship to reduce risk, maximize efficiency, and improve quality.
5. Communication
Transparent and timely communication is crucial in a productive relationship between the business and the supplier. There should be open and regular communication about orders, delivery schedules, issues, and similar other aspects. This increases trust, helps tackle challenges, and leads to long-lasting relationships.
6. Documentation Updates
As the collaboration with the supplier progresses, it is important to update documentation. This could be related to keeping a record of invoices, revising contracts, or other documents deemed important to a business.
7. Supplier Evaluation
Supplier management also involves regular supplier evaluation. The evaluation can be related to quality, timely delivery, cost, and other aspects. Businesses can even set proper KPIs to use to evaluate all their suppliers over time.
Benefits of supplier management
Supplier management is becoming a necessity instead of a choice in the current competitive era. The above steps prove how it streamlines all activities involved in a supplier’s lifecycle. However, let’s take a closer look at some of the key benefits of supplier management:
1. Reduced costs and enhanced quality
The supplier management process involves a comprehensive round of supplier identification and qualification. This helps you find the best supplier that dominates in terms of product/service quality, cost-friendliness, fast deliveries, etc. This way, you can get the best quality supplies at reduced costs.
2. Reduced risks
Efficient supplier management reduces risks related to supply chain disruptions, quality assurance, cost fluctuations, compliance issues, and similar others. Moreover, it also helps you and the supplier to mutually handle issues and work collaboratively to uplift each other’s business.
3. Improved operational efficiency
Supplier management is the key to improving operational efficiency. First, it structures all the essential elements of managing suppliers. Secondly, it assists in regular supplier reviews, which helps to pinpoint shortcomings and improvement areas. This way, you can attain higher operational efficiency.
4. Better visibility and transparency
Supplier management provides better visibility and transparency to the whole supply chain. You will be getting timely updates about the shipments and other stats about supplier performance. Moreover, open and clear communication will also increase transparency. This will lead to improved quality of products/services and operational efficiency.
5. Reduced price volatility
Price fluctuations can have a prominent negative impact on customers. However, this is reducible by effective supplier relationship management. For example, you can negotiate a fixed pricing or scaled increase in pricing in exchange for a set minimum order size or a longer contract. This way, you can have strategic price management instead of dealing with unexpected price volatility.
6. Longer and stronger supplier relationships
Supplier management is the key to having stronger supplier relationships. When you and the supplier have effective collaboration, it increases trust and drives innovation. Both you and the supplier work together to grow each other’s business and have a long-lasting, strong partnership.
7. Increased customer satisfaction
When supplier management ensures high-quality products/services, reduced costs, and timely shipment, it leads to increased customer satisfaction. This satisfaction will help grow your business and also benefit suppliers with more orders.
How a BPM tool can help in supplier management?
Until now, we have learned that supplier management offers many benefits and is a necessity in the emerging globalized economy. However, the multiple elements involved in supplier management can be overwhelming to handle. This is exactly where BPM comes into play.
Business Process Management (BPM) tool is a software solution that helps organizations model, execute, automate, and enhance their processes. Talking specifically about supplier management, a BPM tool provides a centralized and structured framework for organizing, automating, and optimizing supplier management activities.
Some of the ways BPM tool can help supplier management are as follows:
1. Process automation
A BPM tool allows you to create workflows for different supplier management activities to standardize and automate them. For example, Qflow BPM can automate the routine tasks of invoice processing, order placement, etc. Similarly, you can also automate supplier onboarding activities. This helps save significant time, standardize activities, and reduce errors.
2. Enhanced visibility and control
A BPM tool provides centralized visibility and control of all supplier management activities. It helps track shipments, transactions, KPIs, and much more. Moreover, it can provide analytical data about different aspects, such as delivery time, inventory levels, supplier performance, etc. This enhanced visibility leads to improved operational efficiency and helps identify gaps.
3. Facilitation of collaboration
A BPM tool not only improves operational efficiency but also facilitates effective collaboration with suppliers. It serves as a centralized platform where the business and suppliers can collaborate on different activities, such as accessing/exchanging documents, visualizing current stats, etc. For example, when an issue arises about delayed shipment or something else, the Qflow BPM can automatically notify the relevant parties. This way, BPM streamlines collaboration and improves relationships.
Conclusion
Since almost every business now involves multiple suppliers, supplier management is becoming essential for all businesses. It provides a well-structured way to handle all key activities related to suppliers and leads to reduced costs, improved quality, and many more benefits. On top of that, if you deploy a BPM tool for supplier management, you will get the added benefits of automated processes, enhanced visibility, and effective collaboration. Therefore, it’s time you uplift your business operations and drive growth with BPM-powered supplier management.
