We all know about the benefits of making friends. Taking the time to cultivate positive relationships with others is a good way to enrich your own life. This applies to businesses too, because strong bonds lead to preferential treatment. When suppliers enjoy working with a company, they’re more likely to give them the best deals.
So it’s always worth investing in constructive, rewarding interactions with partners and affiliates. In fact, supplier lifecycle management should be central to your procurement processes. If you want to maximize the value of your external relationships, you’ve got to keep a close eye on them. Nurture them, expand them and grow them into loyal, mutually beneficial arrangements.
Getting to Grips with Supplier Lifecycles
In the same way, sales must move through a system of steps and goals in order to become profitable transactions. Supplier relationships are a journey — one that starts before you lock in any kind of deal or price, because you’ve first got to find a suitable candidate. It’s important not to rush into a contract before you’re sure the supplier is a good fit for the business.
Supplier lifecycle management software can be a major asset. Using technology instead of relying on manual processes is a good way to increase internal visibility and reduce costs. It logs and records every piece of data produced by communications with other companies. The result is a detailed report on their profitability, efficiency and overall impact.
Most supplier lifecycle management solutions split the journey into eight key stages. They start with the need to source suitable candidates and end with the long-term care of profitable, productive relationships.
1. Supplier Qualification
This is where the journey begins, and it involves searching for, or appealing to, suppliers interested in starting a new relationship. Oftentimes, businesses advertise their need, much like they’d advertise for an open job position. Potential suppliers are invited to register their interest if they feel they can fulfill the requirements.
2. Supplier Evaluation
Again, much like a recruitment search, the business then assesses these candidates. In order to avoid wasted time and resources, it’s important to eliminate suppliers that don’t seem suitable. There are all kinds of ways to make a determination, from scorecards to independent evaluations, direct discussions and on-site inspections.
3. Supplier Selection
After assessing all of the candidates, you can go ahead and pick your preferred supplier. The decision will have an impact on every part of the business, so take your time. The goal should be to select an organization that’s capable of long-term interaction. You don’t want to put a lot of effort into securing a supplier and then have them terminate the relationship after a year.
4. Supplier Onboarding
Part of building a long-term relationship is successful onboarding. The new affiliate must be properly inducted. While the supplier has already agreed to meet requirements, they can only do so with enough information about the how, when, what and where of it. Onboarding is also the perfect opportunity to set up monitoring processes.
5. Supplier Performance
Consistent monitoring is a standard part of supplier management. If you don’t keep a close eye on transactions and communications, there’s no way to know if they’re beneficial. Supplier lifecycle management software makes this easy, as it provides a window into the entire journey. You can isolate and assess the productivity of every stage, from purchase to delivery.
6. Supplier Risk
Obviously, the goal should be to eliminate as many risks as possible. However, you can only do this if you identify them first. Risk management is designed to protect your business in the event of a breach of contract, late deliveries, data loss, quality failure and more. No matter how much you trust a supplier, it’s essential to safeguard yourself against unexpected crises.
7. Supplier Development
Supplier development becomes a concern after you know the relationship is a valuable one. It sees a business work closely with external partners to try and streamline transactions, which is beneficial for both parties. The faster a supplier can deliver on and close individual purchases, the more money they’ll earn and the more efficient your operation will be.
8. Supplier Management
The final stage of supplier lifecycle management is maintenance. If a relationship is worth holding on to, you’ve got to continue to invest in its future. This is absolutely vital because it’s really the broader objective of all of these processes. The goal, from start to finish, is to create lasting, profitable partnerships.
How to Manage Supplier Lifecycles Like a Pro
The single best way to optimize supplier lifecycles is with a targeted software solution. Technology is an invaluable asset because it takes much of the manual work out of generation and maintenance. It allows businesses to focus on strengthening relationships, as they’re no longer spending time chasing after invoices, filing documents or writing reports.
Plus, the more visibility you have when it comes to your own business, the more honesty you can offer suppliers. Trust is a big part of modern contracts. The best way to build stable bonds is by listening and responding to concerns in an authentic manner. It’s pretty simple: just put your suppliers at the heart of the business, and make them feel important. If you do that, you’ll have a long, successful run with your suppliers.