Supplier Management Best Practices: An Easy Guide for Businesses

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IntroductionSupplier ManagementBest PracticesSummaryContact Information

2019 | SPENDEDGE

2019 | SPENDEDGE

Business needs have changed a lot over the last fewyears, resulting in shorter product lifecycles and widermarket swings. As a result, supplier collaboration hass

emerged as one of the top strategies to elevate theperformance of businesses to the next level. Suppliersof today possess detail insights into market changes

and have their fingers on the pulse of innovation, whichwill prove beneficial in today's hyperkinetic business

environment. But to gain value from suppliers,businesses need to understand how to better manage

suppliers. Below, you will find the supplier managementbest practices for 2019 and beyond.

Introduction

Businesses usually segment their suppliers basedon their impact on the supply chain and supplymarket complexity. They classify suppliers into

strategic, bottleneck, leverage and routinesuppliers which many a time may lead to poor

return on investments (ROI). By incorporating athird parameter that can help measure the

compatibility between the organization and thesupplier, companies can better manage their

suppliers and achieve set objectives.  Also, thiswill help them to improve supplier relationship

management, develop supplier-specific strategies,and improve collaborations with them.

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Segment supplierseffectively

Suppliermanagement best

practices#1

After segmenting suppliers, companiesshould develop a governance model that cantrack the relationship with suppliers from the

beginning. This will provide clarity tobusinesses in understanding - who is in

charge of managing the relationship withsuppliers and when should a senior executivebe involved? It requires resources from bothbuyer and supplier companies to ensure thatthe performance meets business objectives.

In the case of strategic suppliers, the degreeof governance will be more than

transactional suppliers.

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Developgovernance model

Suppliermanagement best

practices#2

Improving collaboration and transparencyand following the partnership, is one of the

supplier management best practices that willhelp companies boost growth.  Companies

need to promote collaboration andtransparency as one of the key elements of

supplier relationship management. Thisrequires businesses to be transparent abouttheir organizational goals and expectationsfrom suppliers, especially, while managing

multiple suppliers since it will help companiesto build trust and obtain the desired outcome.

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Improvecollaboration and

transparency

Suppliermanagement best

practices#3

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Having a service level agreement is one ofthe best supplier management best practicestoday. Simply having verbal agreements can

sometimes lead to confusion and disputesbetween buyers and suppliers. With servicelevel agreements, companies can easily sortissues regarding cash flows or availability of

raw materials. The document acts a legalproof of the business relationship and clearly

defines business conditions that help indispute resolution.

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Sign ServiceLevel Agreement

Suppliermanagement best

practices#4

Supplier quality management is an important aspectof supplier management. Companies need to have a

robust process that can monitor and ensure thequality of products and services offered by suppliers.

However, most companies lack the required approach.It highlights the opportunity for businesses toimplement one of the most valuable supplier

management best practices in the form of skill sets.Treating suppliers as partners and maintaining

dialogues while ensuring the quality of services is theskill that employees need to learn in the long run.

Making employees aware of expectations in suppliermanagement will also help businesses in building

fruitful supplier relationships.

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Develop skill sets

Suppliermanagement best

practices#5

Procurement professionals need to rateand grade their suppliers based on the

value provided and their ability to adhereto contract terms and agreements.

Businesses having a supplier managementprocess develop supplier scorecards to

track the performance of their suppliers.They rate and grade their suppliers basedon performance metrics that can evaluatethe value-creation by chosen suppliers and

identify problem areas.

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Measuresupplier

performance

Suppliermanagement best

practices#6

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Risks can never be avoided while workingwith suppliers. Every company's suppliermanagement practices should necessarily

include strategies to mitigate supplier risks,to mitigate the risk of supply failure due to

lack of resources or any other reason. Thesestrategies may vary by enterprise, industry,

or geography but there are some generalbest practices that need to be followed to

manage supply risks. Not only this, financialrisks, operational risks, data security risksand regulatory risks should also be given

due importance.

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Manage supplierrisks

Suppliermanagement best

practices#7

With changing market dynamics, it has become crucial for businesses toimprove their efficiency. However, companies need to engage with more

stakeholders to achieve this business objective. They need an effective suppliermanagement process that can offer a 360-degree view of suppliers' activities

and drive greater value throughout the sourcing process. By implementingsupplier management best practices, businesses can ensure end-to-end success.

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Summary

Contact Info

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SpendEdge delivers robust, real-time procurement market intelligence solutions tohelp sourcing and procurement professionals to manage supplier risks. Our

innovative procurement solutions help enterprises to transform the structuralcapabilities of businesses and improve execution efficiency. Our state-of-the-artprocurement solutions also help enterprises to transform structural capabilities,

improve execution efficiency, and achieve better cost savings. We provide businesseswith actionable insights and techniques to improve their supplier management

capabilities.