Supplier Management

Home Glossary Supplier Management

In today’s fast-paced world, supply chains are continually evolving into  multifaceted dynamic models.  To accommodate the heavily changing demands of customers, companies need a robust Supplier Management plan.

What is Supplier Management?


Supplier Management is seen  as a supporting pillar of the supply chain function  that deals with the end-to-end activities of suppliers. Competent suppliers are crucial for the growth of a business, whether a manufacturing unit or a food retail chain.

At some point, every business or organization purchases goods and services from vendors (suppliers) to reduce manufacturing setup costs. Thus, Supplier Management refers to strategically dealing with third-party suppliers who provide essential products and services for your business.

For example: Consider that you are running a car business, in which the exhaust pipe of a specific car model is imported from a third-party vendor in a different county. You have noticed that the quality of those exhaust pipes is steadily getting worse. In such a case, you can establish a Supplier Management office in that country to regularly interact with those vendors and visit their sites from time to time to ensure the reliability of the parts supplied to you.

 

Why is Supplier Management  important?


As most organizations are expanding their businesses globally, the demand for an effective supply chain is increasing rapidly.  Supplier Management also safeguards a company’s sales in the international and domestic markets. It makes the activity of purchasing from third-party suppliers more profitable.

A well-structured Supplier Management model is required to develop good relations  with suppliers, while handling customer requirements properly, and communicating these requirements to the company’s vendors..

With an efficient Supplier Management, businesses can import low-cost, high-quality goods and services from other countries without changing the current organization structure. You do not  need to build a pen factory when you can order them from a third-party supplier at a discount.

Now that we have established the  importance of Supplier Management, let’s look at some benefits of Supplier Management.

  • Cost Saving: 

    With a dedicated Supplier Management team, businesses can understand the supply chain process better and focus on improvements. Supplier Management teams can use SRM (Supplier Relationship Management) tools to continually evaluate the performance of each supplier.

    They can ask for quotations of required goods and services from multiple suppliers. This will fuel competition among suppliers and help organizations secure the best deals.

  • Reduces Price Volatility:

    Suppliers usually develop a professional rapport with their clients and establish trust so that their clients continue to purchase from them everytime there is a requirement. . Therefore, for the sake of long-term business associations, suppliers do not increase the prices of their products frequently.

    Companies can take advantage of fixed prices and make long-term contracts with suppliers. A  business can thus adjust the prices  as per market demand without any price fluctuations from the supplier’s end.

  • Quality Improvement:

    Supplier Management plays a key role in maintaining quality.  With onsite Supplier Management teams, organizations can understand how different markets across the globe function. . Based on this knowledge, businesses can build strategic relations with local suppliers. 

    To acquire more business, suppliers provide the best products and services to their existing customers, and this  ultimately improves the quality of the finished goods and services.  Buyers and suppliers  can also exchange ideas for continuous improvement.

    Buyers  can implement ERP tools to track their supplies. They can generate MIS for sales, customer feedback, price fluctuations, and monitor profit figures  to get the most out of Supplier Management tools.

    In conclusion, Supplier Management is essential for businesses that aim to expand rapidly while effectively handling their suppliers.  Supplier Management is a practical approach to maintain profits and increase the efficiency of a business. With the help of Supplier Management tools, companies can coordinate well with their suppliers  and ensure significant savings.  The traditional ways of managing suppliers are now obsolete. Companies need to adopt well-organized systems  like Supplier Management to make informed decisions when buying from third-party suppliers.

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