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Strategic Supplier Management: The Key to Procurement Optimization

Supply Chain Management

by Editorial Office

As a key component of Supply Chain Management, Supplier Management refers to the strategic management and control of a company’s relationships with its suppliers. Punctuality, quality and sustainability in particular play a decisive role in the selection and evaluation of the right suppliers, as these aspects automatically impact procurement. In this article, we explain how you can utilize smart supplier management and thus optimize purchasing processes. Further, we discuss the role that data exchange and transparency play in this context.

Supplier Management and Procurement – closely linked processes along the Supply Chain

The COVID-19 pandemic, geopolitical tensions, scarcity of resources – the challenges of recent years have made it clear time and again that long-term and stable relationships with suppliers increase competitiveness and strengthen supply chains. Choosing the right suppliers is particularly important for procurement processes. After all, the latter ensure that the required goods or services are not only purchased at the best possible conditions, but are also available at the right time and in the agreed quantity and quality.

Through efficient supplier coordination, a strategic Supplier Management helps to optimize procurement processes in order to avoid bottlenecks and delays and minimize risks that could lead to interruptions in the value chain: 

  • Selection and qualification of suppliers: Procurement begins with the identification of suitable suppliers who are able to meet the company’s requirements and deliver the products needed. This is where Supplier Management takes effect: using various criteria such as price, quality, sustainability or punctuality, it helps with the selection and evaluation of suppliers. At the same time, strategies are developed to improve performance and to monitor and enforce the agreements made. The development of alternative suppliers to diversify the supply chain is also part of this area.
  • Contract management: Once the procurement team has defined the negotiation points including prices, quality standards and delivery conditions with the selected suppliers, Supplier Management supports the creation, monitoring and administration of the corresponding contracts. Through the previously agreed services and defined expectations, it ensures that the contract contents are adhered to.
  • Supplier evaluation: Another task of Supplier Management is the monitoring and evaluation of supplier performance throughout the entire procurement process and to identify potential for improvement. If, for example, aspects such as punctuality or quality are not met, this information from the supplier evaluation can be included in future procurement decisions.
  • Risk Management: The regular audits and reviews document the performance of suppliers. Hence, potential problems can be identified at an early stage. Diversification, which is often targeted, also minimizes dependencies on individual suppliers in order to prevent serious bottlenecks in procurement.
  • Social responsibility and sustainability: Ever more stakeholders are striving to do business responsibly and are opting to work with companies that assume social and environmental responsibility: Where do the goods come from, what type of packaging is used, and what is the carbon footprint of transportation? Integrating sustainability criteria into Supplier Management also affects procurement and can strengthen a company’s reputation.

Supplier Management should be understood as an ongoing process. The aim is to continuously improve supplier relationships, strengthen their expertise, meet sustainability criteria and ensure a smooth flow of goods – ambitious goals for which a great deal of information and data must be collected and consolidated in real time.

Transparency and data exchange as decisive factors

The importance of real-time monitoring and holistic aspects has increased significantly in recent years – transparency and data exchange have long become key elements in logistics. Supply chain managers are therefore increasingly relying on digital solutions in order to reconcile the various process worlds. Silo systems often need to be broken down and companies’ IT architecture modernized.

At Hermes International, Supplier Management is part of the SCM product and integrates advanced technologies and data analysis tools into its processes: Digital procurement platforms support the selection and identification of suppliers, obtain quotes and streamline procurement processes. By collecting, storing and analyzing data, companies gain transparent insights into costs, quality standards, delivery times and other relevant factors. The use of Internet of Things (IoT) or GPS tracking technologies also enables tracing the path of goods from the point of origin to delivery to the end customer.

By using cloud computing, relevant data and applications can be stored and managed in a secure, flexible and scalable environment. Thus, managers have access to the information they need regardless of location, time or device. Such transparent processes facilitate collaboration and offer little scope for misunderstandings: After all, open and transparent communication between companies and suppliers helps to build long-term trust and promote a culture of partnership.

Conclusion: Supplier Management for sustainable partnerships and satisfied customers

Well-coordinated Supplier Management has a major impact on ensuring that a company’s individual procurement process requirements are met. Transparency in terms of supplier performance, quality standards and risk management helps to build sustainable relationships and partnerships based on common goals. This is further supported by digital solutions that facilitate the necessary data exchange, automate processes and provide information in real time. After all, only when orders, deadlines and deliveries are precisely coordinated can there be a smooth flow of goods with punctual deliveries and satisfied customers.

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