The objective of vendor or supplier management is to ensure that all contracts with suppliers support the needs of the business.
The primary objectives of Sourcing and Supplier Strategy are high satisfaction and increased productivity experienced by end users, in addition to low total cost of ownership. To succeed in attaining these goals, Sourcing must achieve, maintain and utilize a strong negotiating position towards the supplier(s). Disciplined Sourcing and Supplier Strategy helps reduce supplier dependency.
A good supplier management strategy not only includes working with suppliers to improve their performance, but also integrating with sourcing processes and communicating the strategy’s value to the organization.
But many organizations lack this holistic approach to supplier management. For example, while they are checking dozens of references, getting samples, and conducting site visits to vet new suppliers, sourcing staff may not be accessing information about great suppliers that they are currently doing business with.
As a supplier management strategy begins to improve the performance of suppliers and reduce the risk of sourcing decisions, Gordon warns of a common mistake: not sharing the results within the organization. “People in the procurement or supplier management area get so busy working with their suppliers that, they kind of forget to tell anybody,” she says. “They should be communicating this up the organization and with other departments involved.”
Multi-sourcing is one of the possible strategies. Multi-sourcing refers to the creation of a manageable group of suppliers and/or internal providers that can provide all the required services, and that may be substituted for one another if necessary.
Sourcing is responsible for setting and following the selection criteria for suppliers. To manage risk, a company should choose reliable and solvent suppliers and join ecosystems that are able to deliver services, systems and products with solid business continuity. In addition to monitoring financial and operational stability, Sourcing needs to ensure that supplier organizations follow other relevant company policies such as those related to corporate responsibility.
