Supplier Management
Definition
"Ensure that the organization's suppliers and their performances are managed appropriately to support the seamless provision of quality products and services."
The practice requires:
- Sourcing strategy and guidelines that effectively support organizational strategy
- Service relationships with suppliers and partners managed effectively per internal and external regulations
- Effective integration of third-party services into products and services
Key Terms
Sourcing strategy: "An organization's strategy to obtain the products and services needed to effectively and efficiently run its business."
Supplier: "A stakeholder responsible for providing services that are used by an organization."
RfX: Umbrella term for request for information (RFI), proposal (RFP), quote (RFQ), bid (RFB), or demonstration (RFD).
Request for Information (RFI): "A formal, yet typically non-binding, document or communication used to gather information about products, services, or solutions available from potential suppliers."
Request for Proposal (RFP): "A formal and comprehensive document issued by an organization seeking proposals from potential suppliers to provide products, services, or solutions to meet specific defined requirements."
Request for Quote (RFQ): "A formal, yet concise, document used to solicit price quotes from potential suppliers for specific, often standard, products or services."
Request for Bid (RFB): "A formal and highly-detailed document used to invite competitive bids from potential suppliers to provide specific products or services."
Request for Demonstration (RFD): "A formal document used by organizations to request live presentations or hands-on demonstrations of products or services from potential suppliers."
Processes
Managing Common Approach
- Develop and agree sourcing strategy
- Develop and agree supplier management procedures
- Communicate and embed sourcing strategy and procedures
- Review and adjust sourcing strategy and procedures
Managing Supplier Journeys
- Identify available suppliers
- Engage with suppliers and communicate demand
- Evaluate and select suppliers
- Contract suppliers
- On/offboard suppliers
- Manage consumption and monitor supplier performance
- Assess and review suppliers
Key Metrics
| Metric | What it measures |
|---|---|
| Cases where strategic goals failed due to third-party dependencies | Strategic risk |
| Strategic goals not aligned with sourcing strategy | Strategy alignment |
| Sourcing objectives not linked to organizational strategy | Governance |
| Cost comparison: internal vs. third-party service | Value assessment |
| Satisfaction with third-party relationships and integration | Relationship health |
| Regulatory breaches (internal/external) and their impact | Compliance |
| Value gained from suppliers/partners (benefits, risks, costs) | Value realization |
| Losses/delays caused by poor third-party integration | Integration quality |
| Incidents and SLA breaches tied to third-party involvement | Service quality |
Key Roles
- Supplier manager
- Supplier coordinator
Recommendations for Success
- Create realistic sourcing strategies
- Develop partnerships based on trust
- Leverage supplier expertise to improve value streams
- Perform adequate due diligence when outsourcing core functions
- Develop the practice continually without overcomplication
- Adjust for complexity
- Demonstrate business value
Software Tools
- Workflow management and collaboration tools
- Monitoring and event management tools
- Knowledge management tools
- Work planning and prioritization tools
- Analysis and reporting, survey tools
- Supplier management tools