What is supplier management?

Today’s supply chains constitute a large, complex ecosystem of suppliers and trading partners, each of them adding value as they deliver goods and services to the marketplace. Global enterprises often rely on tens of thousands or even hundreds of thousands of suppliers. Companies implement a supplier relationship management process to manage this vast array of partnerships.

For companies in the product-delivery business, success depends on the ability to acquire, retain and effectively work with suppliers to meet customer expectations for quality products—delivered on time and in full. As much as 50% of a company’s value can depend on its supplier relationship(PDF) strength.

But as supply chains have become global networks of networks, supplier management processes have grown increasingly complex, time-consuming and costly. A strong dependence on manual, paper-based processes, as well as double entry of digital events and form filling has exacerbated these challenges—slowing execution, enabling human error and hindering agility.

These difficulties are greatly compounded by turbulent times. Recent events have spotlighted the critical importance of the ongoing relationships between a company and its partnerships and suppliers. These relationships are essential for maintaining agility and resiliency within supply chains.

Supply chain leaders have responded to these challenges by increasing their commitment to digitizing and modernizing supplier management processes. The numerous benefits include enhanced supplier verification, improved onboarding and stronger lifecycle tracking. Result: more effective supply chain relationship management.

The digital transactions and human interactions exchanged between an enterprise buyer and one or more suppliers as they jointly work to deliver the raw materials, parts or supplies used to produce a finished product for end customers.

Supplier relationship management processes associated with discovering and validating suppliers, becoming interconnected with those suppliers, providing connectivity with relevant enterprise systems and enabling B2B transactions.

Procurement and supply chain activities focus on building mutually beneficial relationships with suppliers. These activities include managing interactions with third-party companies and developing strategies for various types of supplier relationships (for example, an “arms length relationship”).

Most supplier management activities, including selecting and hiring suppliers, onboarding those suppliers, managing and enforcing contracts, administering payments, handling terminations and more.

The process of collecting, maintaining and applying data related to a business’s suppliers, based on extensive communication received from those suppliers.

The future of supplier management is a fully digital experience delivered through multi-enterprise supply chain business networks, direct connections with strategic suppliers and purpose-built blockchains for complex supply chain processes.

Supplier management will continue to build on digitization, trust, transparency and intelligence to improve data quality, ensure information immediacy and optimize processes. It will:

• Extend even further to include more participants in the B2B transactional processes, enabling carriers to be active participants in resolving delivery disruptions and certifiers and other partners to more quickly validate the financial and legal status of suppliers.
  
  
• Deliver widely trusted data accepted by government agencies to reduce audits, simplify B2B and B2G procurement and ensure compliance with trade and customs regulations. Time saved resolving disputes and completing repetitive paperwork can now be spent more strategically.
  
  
• Become even smarter as AI continues to self-learn and build knowledge over time with more data. Organizations can hone their ability to pinpoint recommendations and next-best actions for each unique supply chain and supplier relationship. Then, organizations can confidently apply AI to extend human capabilities and automatically initiate recovery processes to mitigate impacts to the business and customers.
  
  
• Create new value through new capabilities developed with members of the ecosystem. These capabilities not only deliver strategic and operational performance benefits, but can also be commercialized.
  
  
• Enable deeper visibility into further upstream suppliers to identify ways to optimize supply chain operations and manage during times of change. Today, an estimated 40% of supply chain disruptions occur among tier 2 to tier 10 suppliers. However, most supply chain professionals collaborate primarily with only their tier 1 suppliers.

Retailer Home Depot uses blockchain to provide real-time, multi-party visibility into shipping and receiving processes, reducing vendor disputes and strengthening supplier relationships.

Southwire relies on a global business network to expand its network of local freight partners, process invoices 40% faster and strengthen supplier relationships.

Supply chain company Li & Fung Limited integrates with 15,000 suppliers and thousands of customers on a single platform in order to handle transaction peaks of 1.5 million per hour on China’s Singles’ Day.