Online Induction >> Supplier Management System
Published 06/10/2021

Effective Supplier Management

A supplier Management system combines all processes in the organization to maximize the value of money paid to suppliers while gaining a more significant market segment. There is a need for suppliers and organizations to engage each other effectively.

As an organization, dealing with complex supply chains and some suppliers may be complicated due to lack of communication and overpricing of goods. Suppliers are after maximizing their profits while organizations go for the cheapest suppliers in the market. I have researched the ways of handling complex suppliers;

1. Proper communication

To conquer the communication barrier between themselves and the supply chain, they need to establish a two-way communication channel. Suppliers have to prove with written documents the cost of production and all the expenses they are incurring before setting a price tag for their goods. By so doing, the organization will not feel threatened by the supplier and over-pricing.

2. Document transactions and agreements

Getting everything in writing gives a future reference platform, and the parties do not violate the agreements. Documented transactions eliminate misunderstandings on past, present, and future pricing of commodities.

3. Evaluate their services

Organizations should not assume that your supplier will consistently deliver quality goods and services as an organization. Sometimes, they may under-estimate their production and produce sub-standard goods aiming at maximizing their profits. It is advisable to evaluate their products regularly.

4. Request their expectations from the organization

It is good to take time and listen to their requirements and agree on the possible way out. When not intimidated, the supplier will freely bring to the table what the organization should provide for smooth transactions and conduct.

5. Do not fear pulling out

Pulling out from the supplier is not a good practice, but an organization has to quit the chain when necessary. When the supplier fails to supply on time, supplies sub-standard goods, or when the price tag is too high for the organization to afford, it should pull out.

How can an organization manage long-term supplier relationships?

The long-term organization-supplier relationship symbolizes that the supplier has everything that it takes for quality services. An organization can do the following to maintain the relationship;

- Effective communication

Information shared is knowledge gained. Good communication flow avoids confusion and disagreement. Effective communication is characterized by regular face-to-face discussion and consultation.

- Practice ethics

Ethics in business is critical since it promotes trust and long-term relationships. Gaining a reputation for behaving ethically and honestly will go a long way to developing trust, and trust will go a long way to developing relationships.

- Supplier risk identification

Accessing risks in the supply chain is critical because the organization gets to know when to stop ordering, predict possible risks and find ways to mitigate them before they happen. The organization has to dig out and retrieve information about the supplier.

The organization should know whether the supplier is a group of businesses or a company owned by one person and whether global risks may face the supplier. The supplier's financial reports will help in estimating the creditworthiness of the supplier.

- Supplier performance management

It is a third-party management practice that measures, analyzes, and manages the performance of a supplier. The aim of supplier management performance management is cutting costs, evading risks, and driving continuous improvements. The supplier remains focused on the quality of products while adhering to the terms of the contract.

- Supplier compliance management

Managing dozens of suppliers is hugely complex for companies, and it is mandatory to follow up payments and orders. Supplier compliance works in cases where the supplier increases the prices, late delivery, substandard goods, avoid sending wrong orders, inappropriate bill of landing, payments without approval, etc. Compliance management vets the supplier's operating documents and legal requirements to ensure they are up to date.

- Supplier operational management

The operation of the supplier should not be taken for granted and confused with logistics. Operations management follows up on emerging technologies, develops business processes, gets the right business metrics, and updates stakeholders on business matters.

- Supplier logistics management

Organizations that optimize their budgets use supply logistics to cut the funding of their goods' production, storage, and marketing. Logistics work together with the production department to reduce wastage of raw materials. Also, logistics work closely with the end-user to make sure customer needs are satisfied and get feedback.

A supplier management system is crucial as the organization could not think. The system ensures that orders are made and delivered on time. When a management system is combined with logistics and compliance management, the organization´┐Żs processes are carried out conveniently.

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