Supplier relationship management is more important than ever. Increasing market volatility, uncertain political environments and the impact of climate change are all key reasons why organizations need to better manage their supplier relationships.
Adding to that, the COVID-19 pandemic has made supplier relationship management more challenging. Although operationalizing business insights to build supply chain resilience has long been a priority for CPOs, CFOs, and other supply chain executives, the pandemic has stepped up its urgency. In fact, nearly one-third of CFOs rank supply chain issues as one of their top three concerns related to the COVID-19 outbreak.1
So, before we get too much further, let’s look at what is supplier relationship management—and why it matters.
What is supplier relationship management?
Supplier relationship management is a structured approach that allows you to effectively manage all supplier relationships, such as vendor data (e.g., contact information, products, and services), life-cycle management, workflows (e.g., onboarding), hierarchies, risk, performance, and compliance.
Good supplier relationship management helps you maximize the business value of your supplier interactions.
Why managing supplier relationships is a priority
If you don’t manage supplier relationships and information strategically, it can lead to a variety of undesirable outcomes such as wasted resources, lack of business insights, high procurement costs, slow time to market, missed opportunities, negative brand perception or even compliance issues. In short, it can jeopardize the business, not to mention drastically increase your workload.
For example, without a supplier relationship management solution, onboarding a new supplier can take several weeks instead of days. Or, if you don’t know who your suppliers and sub-suppliers are—and whether they comply with industry and sustainability standards—it may severely impact your business.
These are the top supplier relationship management challenges
Whether you’re a supply chain or procurement executive in manufacturing, distribution or retail, the pain points are the same. If you’re sourcing products or services from hundreds or even thousands of vendors, you need to address the following challenges related to supplier relationship management:
Gaining a trusted view into all vendors: Procurement and supply chain executives struggle to get a trusted view of all their suppliers across the enterprise. They also need easy access to supplier information. In fact, only 50% of procurement leaders have high or extremely high visibility into their tier 1 suppliers. Meanwhile, 90% of organizations rate their visibility into their extended supply networks as moderate to very low.2
Improving operational efficiency: Most companies don’t use the right tools for automating and streamlining supplier relationship management. Or they rely on improvised MS Office tools.3 These manual and largely ineffective methods cause redundancies in workload that hinder productivity.
Reducing procurement costs: 93% of chief procurement officers (CPOs) say cost reduction is critical for their organization in the next 12 months.4 Procurement would be better positioned to reduce costs negotiating corporate pricing, terms and discounts with a 360-degree view of all supplier relationships across the organization.
Quickening time to market: Delays in time to market can affect competitive advantage and revenue. Just imagine the opportunities you may miss if it takes you months to onboard a supplier. It’s no surprise that more than two-thirds of CPOs cite improving and automating procurement processes as a top priority.5
Mitigating supplier risk and ensuring compliance: Assessing supplier risk and compliance is paramount. 93% CPOs rated risk reduction as a top priority for their organization.6
Supplier relationship management best practices
So, given all the challenges, what can you do to establish successful supplier relationship management at your company? Consider these best practices:
Start with complete, high-quality and up-to date supplier data.<
Make sure you have a 360-degree view of the supplier network and all supplier information.
Build and maintain your supplier relationship management solution on accurate supplier master data. Use a master data management solution as a foundation with embedded data quality checks and data enrichment options.
Get management buy-in. Use the above list to communicate how supplier relationship management can significantly contribute to important business goals.
5 supplier relationship management tips to implement now
There are several ways supplier relationship management can help you achieve business goals. Here are five tips supply chain and procurement executives can get started with today.
|Supplier Relationship Management Goal||How to get started|
|1. Reduce procurement costs||
Create a holistic, trusted, single view of suppliers that’s available for all buying teams and applications using a master data fueled solution that provides a 360-degree view of all your suppliers and their products. This significantly helps cut supplier information management costs.
Some companies save millions of dollars per year just by streamlining and automating their supplier management, with procurement and sourcing teams gaining visibility into the total spend per supplier. Based on this knowledge, they can negotiate more favorable corporate discounts, pricing and payment terms to further reduce sourcing costs.
|2. Mitigate supply risk||
By centrally managing governed and relevant supplier data across the entire business, supplier management can access a 360-degree view of all supplier data and gain a better understanding of supplier relationships, including sub-suppliers.
Create a 360-degree view of all supplier information to identify critical suppliers and work jointly on developing supply market insight—at and beyond the first tier. By fueling all supplier-facing applications, business intelligence tools, and analytics programs with trusted, governed, up-to-date supplier data, finance, legal and supplier relationship management teams can more easily monitor and analyze their suppliers’ risk and compliance.
|3. Improve time to market
and enter new markets
Improve time to market by accelerating supplier onboarding with automated processes. Using supplier relationship management solutions, companies can significantly increase their agility and speed up time to market. For example, they can reduce the time it takes to onboard a supplier from weeks to days. They can also partner with suppliers that have a strong presence, capability, and track record in that market.
|4. Improve brand image||
Sustainability and end-to-end supply chain transparency are quite often a prerequisite for good brand reputation. Continuously monitor your suppliers’ compliance with industry standards and your sustainability requirements to help improve your brand image.
|5. Improve operational efficiencies||
Improve operational efficiencies with supplier relationship management using a master-data-fueled supplier information management solution that can automate supplier-related workflows. All departments involved in supplier management can collaborate more efficiently. Meanwhile, supply chain teams can streamline the way they manage suppliers’ lifecycles, easily monitor supplier performance, and get answers to key supply chain questions like: “Do they deliver on time?” and “Is this the right quality and quantity?”
A 360-degree view of suppliers is the foundation for successful supplier relationship management
Supplier relationship management success story: Onboarding in days, not weeks
A leading multinational consumer goods company wanted to increase the speed and quality in collecting data to create a product, customer, and/or supplier master data, which would enable them to drive business growth. As part of a broader digital transformation, they invested in a master data management solution from Informatica, including MDM – Supplier 360 for supplier relationship management.
Today, they are using their supplier master tool built on Supplier 360 to manage relationships with suppliers in over 80 countries. They have significantly improved their supplier data quality and visibility into their supplier ecosystem.
During COVID-19 in 2020, they reduced onboarding of new suppliers from 45+ days to only few days. Additionally, they’ve measurably improved supplier data quality, getting it right the first time and noticeably reducing their workload in operations to manage supplier data. They’ve also introduced the right levels of controls and authorizations to help with their internal audit requirements.
To learn more about supplier relationship management and how effective supplier data and supplier information management can help achieve business goals, check out the following:
Result of an Informatica Business Value Assessment (from 2016)