What is Supplier Management?

what is supplier management

Supplier management is a term widely used in the procurement world – yet while it is often referred to, it is often not used effectively to maximise its advantages. eProcurement leader Delta delves into the subject of supplier management, and how it can help buyers to be as effective and efficient as possible in their procurement projects.

What is supplier management and why does it matter?

In broad terms, supplier management refers to the management of relationships with third-party vendors that supply your organisation with essential goods, works or services. This involves both the strategic managing of all interactions with suppliers, to maximise their value for your business, and your collaborative relationship going forward.

A common misconception is that supplier management is something that only large organisations participate in. However, all organisations of all sizes and across all industries will purchase goods, works or services from third-party vendors at some point. When that happens, the approach your organisation takes in managing and communicating with your suppliers will be crucial to the procurement process – and it requires careful consideration.

Organisations need to dedicate time to define the processes of their supplier management and make sure they enforce them properly. After all, it is in the best interest of buyers – who need to continually account for why money is being spent and with whom – to ensure their suppliers are delivering the quality of goods, works and services that were promised.  Effective lines of communication should be in place to monitor supplier performance to achieve the best outcomes for all parties involved in procurement.

The steps to supplier management

To successfully cover as many bases as possible when defining supplier management within your organisation, consider implementing the following actions:

  • Define internal policies instructing how you will govern your suppliers and ensure the people who are involved with supplier management understand these policies.
  • Draw up and agree on legal contracts between your organisation and its suppliers.
  • Outline what your expectations are and what you expect to receive from third-party vendors and identify the next process if standards should fall below expectations.
  • Maintain accurate and complete records of supplier performance and refer back to them regularly.
  • Actively manage your suppliers and set up regular meetings to discuss progress. Keeping regular contact with your suppliers is a crucial step to transparency across the wider supply chain.

What is supplier management in procurement?

The very essence of public sector procurement is about ensuring that buyers achieve the maximum return from the public money that is being spent. Public sector buyers need to be able to demonstrate they are squeezing the most out of every pound they spend, and that each decision is carefully informed by data, alongside their suppliers.

Therefore, best practice management plays an instrumental role in achieving this: management of your suppliers, management of your procurement processes and management of your internal organisation and how it operates, not only with third-party vendors but also with other internal teams (otherwise known as Category Management – for more information on this, read our guide ‘What is Category Management?’).

The importance of supplier management in procurement cannot be overstated. Supplier management has evolved considerably from being a post-contract box to a tick. Now buyers and suppliers are working much more closely on building strategic planning, often before the contract has even been published, to ensure the performance and capabilities of suppliers are being strengthened, instead of being held back.

Aspects of supplier management in procurement include:

  • Sustainability initiatives – this has long been a talking point in public sector procurement and will continue to be so. How sustainable a procurement project is lies largely with the supplier working with the buyer and the wider supply chain to deliver innovative working methods.
  • Supplier development – working with suppliers to help them continually adapt and improve on their performance. On a project that encompasses sustainability and social value, ensuring that suppliers deliver on their promises through regular meetings and an open line of communication is essential.
  • Risk management – planning for potential risks before the contract specifications are established.

What are the benefits of supplier management?

Those organisations already working to implement processes and systems in supplier management across their business operations are likely to experience a range of benefits. Many of these benefits organisations will notice immediately, while others will take a longer time to bear fruit. However, they will play a crucial role in helping organisations meet their business goals in both the short and the long term.

Greater predictability and understanding of what is happening across your supply chain

By reviewing how your internal organisation operates, and how this extends to your suppliers and how those external relationships are managed, you are more likely to be able to identify other areas of improvement. Your organisation is effectively exposing what works and what doesn’t, leading to positive changes that benefit all parties.

Access to higher-quality products

The goal of supplier management is to ensure your suppliers are delivering the best they possibly can. By evaluating their performance, and assisting them where and when required, you are securing for your organisation access to higher quality goods, works and services. Public money is being spent the best way it can be.

The ability to make better business decisions, avoid disruption and be aware of all goings-on

At the heart of supplier management is the ability to make better informed decisions about what your organisation is doing. Through streamlining your processes, for the benefit of your internal teams and external suppliers, everyone involved will have a full understanding of the goals that need to be met, when they need to be met by, and how these goals will be achieved. When buyers continually manage their suppliers across the entire supplier lifecycle, this often minimises disruption with overwhelmingly positive results.

Delta drives productive supplier management

Delta hosts a powerful eProcurement system that is designed to drive productivity in procurement, through processes such as supplier management. Our web-based platform supports buyers to manage tenders, suppliers and contracts across a single integrated solution.

Delta allows buyers to more easily access their suppliers and collaborate with them continuously throughout the tender process, giving users appropriate privileged access to tender documentation and progress when they need it.

Delta champions supplier management seamlessly, by providing the tools and resources buyers need to work more effectively with their suppliers, no matter where they are in the world.

Find out more about Delta’s Supplier Management software and how our tools can help your organisation improve its supplier management strategy.

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