February 4th, 2019 • Procurement Process • Vendor Management
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.
The manual supplier management process is tedious, time-consuming, and expensive. An automated supplier management process helps procurement teams focus more on identifying new suppliers and nurturing existing vendor relationships.
An automated supplier management process:
Vendor management solutions offer organizations the flexibility and scalability they need to create a customizable supplier management process that grows with their business.
The modern supplier management software solutions integrate with an organization’s ERP portal without becoming too dependent on the ERP or legacy system. So, even when an organization’s outdated procurement system goes through routine upgrades or changes, the supplier management process will remain accessible and operational.
Here’s how businesses of all sizes can create a streamlined supplier management process using process tools like KiSSFLOW:
Businesses can create a brand new supplier management process from scratch using a drag-and-drop form builder or just choosing one from the existing list of templates. Business users can auto-fetch information, add tables, and use computed fields to build a solid process.
You can create dynamic workflows that enforce policy and ensure accountability throughout the supplier management process from supplier classification to collaboration and performance evaluation transparently.
After creating the basic process template, you can work on ensuring data security by setting role-based permissions, enforcing policies, defining approval tasks, establishing dependency, and more to implement the process.
Once the process is ready to be shared with everyone, it is connected with other procurement software through API integrations to create a single source of truth. Once the supplier management process is up and running, any and all information can be retrieved at a glance in a single interface.
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 and see how easy it is to maximize opportunities, engage key vendors, segment suppliers, and create a strategic sourcing process.
With KiSSFLOW, you can build your own supplier management process and connect it with other core procurement processes. Take a look at KiSSFLOW now.
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