Views on Supplier Management

Sourcing organisations are historically strong in negotiating the best value and lowest cost from their suppliers. Those phases of instituting a new deal or new relationship are the most challenging and most enjoyable for many procurement professionals. Unfortunately, that is where too many sourcing departments see their duties end; very few follow through to ensure the negotiated deal has the maximum benefit within their organisation.

Supplier Relationship Management is the next frontier, where sourcing can have a significant impact in its business. There are many reasons for this, but it can be distilled to one principle: without monitoring and feedback on compliance to a given contract, an organisation's expected benefits can rapidly disappear. This demands a level of resourcefulness and attention to detail on a single contract or set of contracts that is difficult for a sourcing manager, juggling multiple demands and multiple suppliers, to provide. But a successful Supplier Relationship Manager will ensure that the business and the supplier are fully executing the opportunities structured into a contract.

A new master agreement between a business and a top supplier can be a fantastic opportunity. It defines a new reality, a new status quo that increases efficiency and profitability. But a new master agreement means changing the current status quo, and that can be a difficult step. People, procedures, and systems must be reviewed and modified to adapt to a new agreement, and that is extremely difficult without monitoring and feedback.

For example, a new agreement may change the way invoices are sent, approved, and processed in the two organisations that dramatically increases efficiency. If parts of the organisation are unaware or unwilling to make the changes specified, the resulting savings are lost. A Supplier Relationship Manager can work throughout an organisation to ensure that the savings that are supposed to occur with a new agreement are actually realised.

A secondary impact of a top-flight Supplier Relationship Manager is that they may discover the first hints of future improvements. They will be continually discussing the needs and desires of their company with its key suppliers, and should be the first to learn of potential new products or services that will create additional advantages and efficiencies for their organisation. Since sourcing is involved from the beginning of the process it is even easier to ensure the improvement will be adopted.

It is clear that designating a Supplier Relationship Manager is a significant use of resources, and is only appropriate for an organisation's top suppliers. But since the top tier of suppliers generates a large majority of any businesses spend, even a small increase in efficiency will have a significant impact on the business bottom line. While sourcing's achievements are typically logged once a deal has been negotiated and the new savings calculated, it does take effort to ensure all the possible savings are actually achieved. A good Supplier Relationship Manager will ensure that the benefits promised in a new agreement with a top supplier are realised in financial performance.