Supplier management is the process of managing the relationships an organisation has with third-party vendors.
All organisations rely on the goods they obtain from suppliers in order to create the products they, in turn, provide to customers. As such, it is crucial that organisations optimise the way they select, evaluate, communicate, collaborate and partner with vendors.
This is easier said than done. A business may easily be dealing with a supply chain consisting of dozens if not hundreds of third-party organisations. Managing all these relationships effectively – that is, ensuring that the most value for money is being obtained from each contract – is inherently and exceedingly complex.
Complete, end-to-end supplier management involves:
- Qualification – Evaluating suppliers to determine if they are able to provide the desired goods on time at the right quantities, quality and price
- Onboarding – Collecting the documentation and all other data required to set the company up as an approved supplier that the organisation can purchase from and make payments to
- Segmentation – Segmenting suppliers into specific categories, such as strategic, tactical, operational and critical
- Collaboration – Working with suppliers to improve the commercial value of the relationship through improved business processes, innovation or joint business planning initiatives
- Evaluation – Tracking and evaluating the performance of suppliers with regards to delivery time, price, quality and service to ensure they meet the terms laid out in the contract
These processes must be ongoing and conducted for each and every supplier, with accurate and complete records maintained and updated regularly. It’s a tall order indeed – especially when relying on traditional, paper-based processes. The solution is to digitise supply chain management.
The Need to Accelerate Supply Chain Digitisation
As McKinsey notes in a recent report, designing and delivering a supply chain digital transformation is a formidable task. So much, in fact, that many companies avoid the challenge altogether, the report says, with previous figures from the management consulting firm revealing the average supply chain digitisation level to be at around 43%.
A separate study conducted by Forrester Consulting on behalf of Ivalua reveals a number of obstacles that stand in the way of realising a digital supply chain that would lead to better supplier management and collaboration.
The CMO of Ivalua notes that the importance of effective collaboration between organisations and suppliers cannot be understated. The spokesman also said that research from Forrester confirms that, while procurement has made significant progress, there remains significant room to improve the scale and depth of collaboration.
The research finds that respondents – 425 global finance, procurement and supply chain decision makers – rate physical and time zone gaps as the top obstacle to collaboration with business units (50%) and strategic suppliers (43%). Lack of mechanisms to collaborate well is the top barrier to collaboration with the broader supply base (42%).
The study reveals that a lack of digitisation and focus on costs is hindering effective supplier management and collaboration. 77% of respondents admit that cost dominates supplier selection for most sourcing projects and a further 80% acknowledge they need to accelerate their digitisation of procurement.
Further barriers and risks involved when working with suppliers were also revealed, including finding the right strategic suppliers (32%), lack of trust by one or both parties (26%), lack of sufficient communication (25%) and lack of data regarding different aspects of the relationship (24%).
The study from Ivalua went on to report: ‘…most procurement departments are taking steps to improve supplier collaboration, but supplier selection is still dominated by cost and businesses are struggling to work strategically with suppliers.
As firms increasingly rely on suppliers to help them keep up with the growing pace of innovation and to adapt during crises such as COVID-19, they need be building stronger relationships. If organizations don’t establish themselves as a customer of choice now, they will be at a significant competitive disadvantage as in-demand suppliers pick and choose who they work with and prioritise.
The study finds that respondents believe the most effective ways to improve supplier management and collaboration are setting up performance goals and KPIs that emphasise collaboration (76%) and investing in technology that enables better information sharing with suppliers (63%).
This would be welcomed by suppliers – 88% of which stated in the survey that the main factor that is likely to increase their willingness to collaborate and share innovations with a specific customer was visibility into payments and timeliness. Again, digitisation is key to this, as it enables payment efficiency, transparency and control.
Digitising Supplier Management with Rebate Management Software
One of the best technologies to facilitate greater transparency and information sharing with suppliers is a rebate management system.
As a buyer, you will of course be taking advantage of supplier rebate programmes. However, such programmes involve making complex agreements with your suppliers, which requires robust contract management.
Contract management is the process of managing agreements with your suppliers and other partners – from negotiation through to creation, execution, data analysis and renewal.
In order to negotiate, monitor and track the performance of your agreements with suppliers, it’s imperative that you have a centralised solution for drafting, reviewing, approving and updating these agreements, as well as sharing this information with all relevant parties.
This is precisely what rebate management software is designed to do.
Effective supplier management is all about obtaining the maximum return on investment (ROI) for every pound spent with a company. Accessing supplier rebate programmes goes a long way towards achieving this – but they must be managed effectively. Getting the most out of rebates means carefully recording all relevant information for every supplier in your supply chain.
Digitising this process with rebate management software means you can keep constant track of all transaction and supplier performance data. This is because all your agreements are recorded and stored in the cloud for easy access, search and shareability.
Sales and purchases are automatically tracked and calculated – and both internal and external parties can review, approve and sign-off deals through a shared portal where all data, terms and conditions are stored. This improves collaboration and transparency between parties, resulting in fewer disputes, which paves the way for payment efficiency.
Crucially, rebate management software not only serves as a robust contract management system, it also provides robust analytics, reporting, forecasting and deal modelling features that allow you to continuously evaluate the performance of your suppliers and identify weak links in your supply chain that need to be rectified – either with new deals or new suppliers.
Want to learn more about how you can digitise supplier management and gain real time rebate visibility across your supply chain? Talk to our rebate experts at e-bate for more information or to request a demo of our intelligent rebate management solution.