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The Latest Developments In Supplier Management
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Every business needs suppliers in order to carry out its activities and achieve its goals. Supplier management aims to manage the value which suppliers can provide. The value of a relationship with a supplier can be defined as the benefit arising from it, minus the cost of the risk associated with it. Effective supplier management helps to maximize those opportunities and cost-effectively mitigate the risks. In this article, we present how supplier management is likely to develop in the mere future.
Most businesses do not look at their suppliers and supplier relationships as a source of value. The major factor that causes supplier relationship management programs to fail is a lack of clarity about what value is being gained – or even a lack of understanding of what value the company is trying to get. Businesses should focus clearly on the value they can achieve from the supply base. They need to implement better measurement and tracking of supplier performance and compliance to contracts.
Organizations should ensure suppliers deliver and meet the liabilities of the contract and the supplier contribution to cost reduction initiatives. With more strategic suppliers businesses can seek contribution to revenue growth, innovation, and business development. To support this, there will be more real-time measurement and reporting.
Historically, many procurement managers saw their role as a gatekeeper. Their duty was controlling access to the supplier, so that procurement teams do not make the wrong commitments to a supplier that worked in opposition to the buying company’s best interests. But, it is not how successful buyer and supplier relationships will work in the future. Technology is already enabling more and faster communication.
The traditional model slows down communication, from day-to-day performance and planning issues to strategic innovation discussions between the parties. We will see more solutions that use social media principles to link up people on both sides - buying and selling. These platforms will also offer an audit trail and promote the relationship between the buyer and supplier. So the role of procurement manager is no longer as a gatekeeper, but as a promoter of positive interaction, between multiple points of contact. It also has an element of control by setting policy, having the ability to audit and review what is going on between the parties.
Real-Time and Data-Driven
A stronger focus on supplier performance, improved risk management, buyer-supplier relationship building, and other supplier management activities will require real-time data. The data should be accurate, accessible, and usable. Technology plays a key role in helping businesses to achieve this. Whether it is machine learning or AI techniques, playing into spend analytics provides a real-time access to compile data. There will be a lot of changes in procurement and supply chain management.
The technology will revolutionize the world of business data. There will be a single source of data about everything from the provenance of raw material to the performance of suppliers. Businesses can then choose who could access their data; there will be no need for suppliers to onboard with multiple buyers separately. The supplier dashboard will become global, pulling data from various sources to give the buyer an extensive view of their suppliers.
Supplier management is going to be more innovative and focused on obtaining innovation from the supply market. There are more knowledge and skill available from the market that is likely to drive innovation than businesses can achieve purely from internal resources. But, many companies are not clear about what it means or how to capture it. Procurement professionals and other stakeholders will have to be more innovative in the ways they work with suppliers in order to generate more innovation. Buyers will need to find where innovation is most likely to come, and identify ways of working with those suppliers to ensure that they become a preferred customer; the buyer to whom the vendor is most likely to give their best ideas. That will define a true source of competitive advantage.
In terms of supplier management, procurement cannot achieve success by doing everything by itself. It is important that procurement works with other internal stakeholders to make supplier management a success. It can play a key role in making supplier management a success for the company.
James Maron is an author at SutiSoft, Inc. He shares his views on SaaS and Cloud-based business management solutions.
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