The importance of supplier management

20 Jun 2014
Article by Achilles

Supplier management is key for an effective supply chain that is properly optimised and accountable, find out how Achilles can help you manage your supply chain.

“Suppliers sit at the heart of almost every organisation’s activities and processes”, Peter Smith from the OFS Portal explained in his paper Why Supplier Management should be central to your procurement thinking.

Indeed, suppliers touch on every part of a business and to ensure a company can run as it should, it needs to ensure the seamless flow of goods and products.

Should a supply chain fail, organisations stand to accrue substantial losses. Outsourcing firm Proxima found that between 2009 and 2011, 69.9 per cent of revenues from 1,954 global businesses were spent on suppliers, compared to 12.5 per cent on staffing. This average is even higher in the oil and gas industry, where 76.7 per cent of revenue was spent on suppliers in 2011.

To limit financial, business and reputational risk, it’s crucial to properly manage suppliers. Gartner defines this as a process that “enables organisations to control costs, drive service excellence and mitigate risks to gain increased value from their vendors throughout the deal life cycle”.

However, effectively managing suppliers is a challenge, especially when you’re doing it alone.

At Achilles, we know how important it is you have control of your supply chain and we offer an auditable process covering your suppliers that we manage on your behalf.

We use a single platform and questionnaire for supplier management, streamlining the process for all parties involved and lowering costs. Our registration, pre-qualification and risk management model is developed by buyers within specific industry sector communities, making it an effective way to on-board and manage suppliers.

To get the most from suppliers and hold them to account, it’s important to track and measure their performance.

“That is essential to ensure suppliers meet immediate needs and to enable performance and value improvement activities to be pursued through the course of the contractual relationship. That requires the right data of course – which must be relevant and usable,” Mr Smith explained in his report.

However, it isn’t just data that should form the basis of an effective supplier management policy and to ensure a supply chain runs smoothly, relationships should be a key area of focus.

Indeed, the human element and a lack of communication can often be why relationships crumble. Similarly, when a supplier holds multiple contracts within an organisation, there is a risk that things will be managed in silo, harming the overall relationship. Mr Smith explains that where there is a case for supplier relationship management, the programme needs to be effectively structured and managed.

However, in some cases supplier management doesn’t get the recognition or attention that it should. According to Mr Smith, this is the result of the fact that the two standard procurement cycles – transactional and sourcing – don’t align with the supplier management perspective.

It’s crucial to pick a solution that places supplier management at its heart in order to ensure the supply chain runs as effectively as possible.

Achilles Supplier Management is our standard community supplier pre-qualification and management solution that gives buyers information on all current suppliers that subscribe to a given community, as well as the ability to find and view future partners.


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