Purchasing & procurement activities and responsibilities have constantly expanded in recent years and the increasingly demanding economic, legal, global and social conditions must be realized by a professional supplier management.
Firstly, the suppliers can not infinitely reduce the cost and on the other hand keep high standards in quality and delivery performance or even strengthen research & development and investments to the future of the business.
Therefore, it is a requirement of a long-term partnership to integrate the supplier as early as possible using the untapped potentials, with the aim to increase their value proposition sustainably.
Ensuring the supply for the company and the efficient execution of a professional risk management is the biggest challenge within purchasing in the coming years as more and more countries and businesses try to create artificial shortages in the commodity markets to increase power and profit.
There is no chance without risk, but today’s factors, such as increasing globalization, increased dependancy on few suppliers and rapidly modernizing technologies require a continuous risk management with the current but also with the potential suppliers. The initial questions in risk management are: What are the risks, which have a great impact, which are inevitable and what proactive measures can be taken ?
We see a real paradigm shift in the purchasing world when it comes to supplier relationship management. In the past the expectation towards the work of a buyer was very low:
In the 60s he was more of an employee in ordering,
in the 70s he was a price cutter,
in the 80s he became the volume maximiser, and
in the 90s he rose to becoming the procurement marketing expert.
The suppliers and their knowledge were not integrated very early into the value chain and it was nothing buyers were considering or even wanted to consider. Only at the beginning of this millennium, the buyers started to add value to the process and became an internal and external moderator because the standard business opportunities had been exhausted in the procurement market which asked procurement to act and to enlarge their radius of activity. It was again that the automotive industry was pioneering this paradigm shift.
However, before your business starts to have an active supplier relationship management you need to ask yourself the following question in all honesty:
- What is your opinion about a supplier relationship ?
- What kind of supplier communication are you currently using?
- Do you trust the supplier ?
- Will you have full transparency with the supplier or only share certain information?
Is “supplier relationship management” really supplier relationship management? Only with the willingness of both partners to cooperate and enjoy a long-term relationship you will see a working supplier relationship management.
Supplier relationship management needs to cover all areas of cooperation with the suppliers working on continuous improvement and working on the total package but not solely on price. The objectives of supplier relationship management for the company are manifold :
- Optimization of the supplier pool and support for ailing but interesting suppliers
- Risk minimization and information about sub-suppliers
- Innovation security
- Creation of global competition
- Transparency to help reducing the overall costs in accordance with the principle TCO (Total Cost of Ownership)
Now, what are the different elements or steps in supplier relationship management ?
- Global supplier risk management
- Global supplier research
- Supplier evaluation
- Supplier selection
- Supplier development & improvement
- Supplier standardization and suppliers reduction
Only with the systematic implementation of the above measures will a supplier relationship management successfully solve the challenges of the future .
Do you have any supplier relationship management in your business?
Klaus Weghaus is an experienced professional who has gained knowledge in international project management and purchasing. He served more than nine years within a big OEM of the automotive industry having various positions within Product Development and Purchasing. Klaus oversees the creative direction at Rhenus Consulting as well as business development. As a marathon runner he will ensure that he does a marathon for you if this is required.