The procurement process consists of three major activities—purchasing, contract management, and supplier management. While each activity plays its own role, historically procurement teams place more efforts in purchasing and contract management.
Why do organizations focus less on the supplier management process? There may be multiple reasons, but one plausible cause is that purchasing and contract management offer more tangible benefits than supplier management.
However, the changing business needs demand procurement teams focus on, develop, and take supplier relationships to the next level. However, it is not as easy as it sounds. In order to collaborate effectively with their suppliers, organizations need to shift from their traditional supplier management tools to embrace technology.
More and more organizations are embracing supplier management automation for better supplier relationship management. Here’s how you can level up your supplier management process using automation.
The supplier management process is the set of activities used by an organization to qualify, segment, monitor, and manage its third-party suppliers. An ideal supplier management process is a well-defined governance model that establishes a two-way mutually beneficial buyer-supplier relationship using trust and accountability.
A supplier management process flow lists out the steps involved in an effective buyer-supplier relationship. Here are the four steps involved in a supplier management process flow:
Supplier qualification is the first step of the vendor management process. It is used to evaluate suppliers and determine if they are capable enough to provide the necessary goods or services to the standards set by the buyer.
Supplier classification is an important part of the supplier lifecycle management process. It is the process of segmenting suppliers into specific supplier quadrants based on a predefined set of metrics like supply risk, total spend, TCO, quality, profitability, performance, and more.
Supplier collaboration is the process that paves the way for mutual development of vendors and buyers through process improvements and product/service innovation. According to a recent McKinsey survey, businesses that collaborate deeply with suppliers grow two times faster than their peers who ignore supplier collaboration.
Supplier evaluation is the final stage of the vendor management process flow. This stage is used to measure a supplier’s performance and ensure they meet the preset contract terms. Evaluation is performed based on a number of metrics like delivery time, price, production, quality, technical, and services.
When you’re convinced of the value procurement solutions can bring to your supplier management process, look for the following features while considering options.
Automated workflows can help improve productivity of the team and hasten approval processes.
The right procurement solution should feature capability to customize the interface to your organization’s requirements for maximum value.
A comprehensive dashboard provides instant insight into the progress of processes can help prevent and identify bottlenecks and errors.
Matching invoices with purchase orders and requisitions can be made effortless and accurate with procurement solutions.
Real-time budget updates can help buyers make well-informed decisions and curtail costs even at the purchase requisition stage.
Over the past decade, the supplier management process has grown more strategic and collaborative. As organizations start realizing the business value a solid supplier management process can deliver, more and more organizations are embarking on a journey to streamline their supplier management process flow.
Businesses that race ahead to implement a strategic supplier management process will emerge as the winners in this collaborative business world.
Looking for a way to consolidate your diverse supplier base and improve the efficiency of your supplier management process? Start with Kissflow procurement software and see how easy it is to maximize opportunities, engage key vendors, segment suppliers, and create a strategic sourcing process.
Kissflow is a compelling procurement system that can be tailored to your company’s requirements with ease. It facilitates effortless vendor on-boarding, comprehensive rating capability, and reliable vendor self-service.
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