Supplier management, the 3 essential steps to building a reliable supplier network

The success of a corporate procurement strategy is not only determined by reducing procurement costs but is primarily influenced by the quality of the relationship with the company’s supplier network and by its size. From global corporations with thousands of suppliers to SMEs with a smaller supplier base, every company needs to optimally manage its buyer-supplier partnership to best meet the expectations of its customers.

As early as 1983, Peter Kraljic, a consultant to the multinational McKinsey corporation who is credited with coining the concept of “supplier relationship management” (SRM), stated in a famous article published in the Harvard Business Review that the purchasing department should focus on strategic supply management, rather than repetitive operational tasks. A seemingly simple message that almost four decades later sounds remarkably relevant today.

US research by IDC Custom Solutions in 2020 estimates that up to 50 percent of a company’s value may depend on its supply chain’s strength and relationships with those who populate it. In a historical context characterized by high uncertainty about economic trends, rising inflation, and an increase in unforeseen – and potentially disruptive – external events on the supply chain such as the current one, this percentage may already be estimated downward.

So, let’s take a look at the three basic steps with which to build and manage a supplier network that is reliable, collaborative, and aligned with one’s business goals.

The first step in efficient supplier management by the procurement department is to analyze the current supplier base and actively scout for new suppliers with the desired profile. Analysis and scouting, in combination with expenditure planning and strategic sourcing, also form an excellent basis for a sound procurement strategy.

Online Procurement is the software solution with which SMEs and large companies can better manage their suppliers and establish successful partnerships.

Digital transformation of procurement processes is essential, the stakes are high: loss of customers, reputational damage, higher costs, reduced customer service levels, lack of compliance, delays in projects, or the execution of business strategies are among the riskiest consequences of supply chain problems or disruptions.

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