What is Supplier Management?

by Arnaud Malardé

There have been more blogs and articles written about global supply chains in the last 18 months than ever before.   The global supply chain has had to withstand the impact of the meteor strike that is Covid-19.  Supplier management has had a wake call that will reverberate for sourcing and procurement professionals in the months and years to come Some changes will have a lasting impact for future generations of Chief Procurement Officers

Supplier management – but not as we know it

The Pre-Covid supplier management process was, for many, purely transactional.  Knowing your suppliers and your suppliers’ suppliers was not seen as a priority.  It turns out this had some limiting factors, and although everyone was impacted, those who had embraced a 360 degree view of suppliers were able to move first.

Those who had already looked in depth at supplier management were able to quickly communicate and negotiate with their key suppliers.  Going forward, having the right supplier information and supplier relationships is going to be increasingly important as the shift towards the supplier having the power has meant that some suppliers have been able to choose which customers to work with.

Supplier Information and how to use it

Supplier management is typically viewed by procurement organizations as one of two things. It is either supplier data input, for use in spend analysis, or it is a process by-product, such as the information we gather from prospective suppliers during strategic sourcing. 

Procurement knows supplier information is useful and important, and that it needs to be cleansed and standardized after we collect it. But are we making the most of the opportunity to create value from this rich resource?

What we may not have considered is how our procurement processes and results would be different if we considered the creation and improvement of supplier management as a primary objective rather than a byproduct.

 If we revisit the when, how and why of supplier information, we are likely to find that we will benefit in the short and long term by giving it a centralized role in all our efforts.

When: Moving the Point of Supplier Data Collection

While dutiful procurement professionals start each sourcing project by researching their spend category and suppliers in spend analysis, we can not really say that we start the sourcing process with supplier management. Even when a spend analysis solution is kept up to date, the supplier information in it accompanies the dollars themselves and the details about what was purchased, when and by whom. It does not tell us much about the suppliers. Instead, it tells us about our own purchasing habits. Procurement needs to gather use-agnostic data about suppliers much sooner in the sourcing process. Ideally, this should be completed early enough to weed out suppliers that are not truly qualified and to include suppliers that are unexpected candidates for contract.

How: The Advantages of Having a Single Supply Chain Platform

Just as supply chains are better characterized as complex networks than linear progressions of one-to-one product handoffs, supplier management and supplier master data is accessed by a web of users for a myriad of reasons during the life of a contract. Procurement, distributed buyers, the executive team, sales and marketing all have their own reason for looking up suppliers. If they are consulting more than one platform to get this information – either out of necessity or habit – the risk that they get incorrect or partial information is elevated. It should be considered a best practice to have a single source of supplier information truth for everyone in the enterprise, and to ensure that one record per supplier captures all of the activity associated with that company. Additionally, having a way to improve the quality of supplier master data is important to consider.

Why: Relationship Building for the Long Term

Having the right information about suppliers as early as possible is not just about improving procurement-supported decision making or streamlining the sourcing process. Effective supplier information has an impact on our supply partners as well. Unintentionally inviting a supplier to participate in an RFP they are not qualified to win is costly for the supplier, and can be damaging to existing relationships. The same is true for suppliers that are already under contract. If a decision is made based on old or partial information, it may not be accurate, and could cast the supplier in an artificially unflattering light. Most importantly of all, however, not having full insight into a supplier’s capabilities takes away from their opportunity to help your company excel – and to profit from it appropriately at the same time.

Companies such as Google, Amazon and Facebook understand full well that the data they collect from interactions with users and customers is just as valuable as (if not more valuable than) the products and services they sell. Procurement should take a page out of their book when it comes to gathering and enriching supplier information. It is a resource in itself, not just a byproduct of our ‘real’ or primary efforts.

Learn more about Ivalua’s supplier management