Your company needs specific supplies and materials to perform its services or produce its products, but you’re not going to be able to build robust supplier relationships without a solid procurement management plan.
Procurement management is all about finding suppliers, identifying which ones can best meet your business needs, and negotiating contracts with them. Once you’ve onboarded a supplier, you’ll need to continue procurement management in order to monitor tasks like purchasing and receiving, invoicing, and reconciling.
Successful procurement management breaks down the process of onboarding a new supplier into discrete tasks and then does the same for the processes involved in managing that vendor relationship. You need a dedicated procurement management staff to handle every aspect of onboarding new suppliers and managing those relationships.
Here’s what you need to do to tackle procurement management successfully.
Analyze the Market:
If you haven’t yet forged your first third-party relationship, or you’re looking to make your current supplier relationships more fruitful, you first have to understand how your company fits into the market. What are you offering customers that competitors aren’t?
Where do customers rank your products and services in comparison with your competitors’?
Who are your ideal customers?
Third-party vendor relationships have the capacity to make or break your business, so you need to choose suppliers who can work with you to further your goals, instead of holding you back. Market analysis will help you choose the suppliers who can support your company’s mission and goals, whether that be by offering supplies at a lower cost, supporting the customer service relationship, or simply being reliable.
Assess the Resources You Already Have:
Do you already have some third-party supplier relationships?
Procurement also involves ordering, receiving, and paying for supplies. If you have some relationships that predate your current procurement team, you should assess those suppliers to make sure they’re able to support your business goals. Perform a third-party risk assessment of the relevant relationship.
Identify the terms of the agreement you have in place and locate the relevant accounting records. Evaluate supplier performance based on any metrics you may have outlined in the contract. You can decide to keep the supplier or not, based on how well they have been able to support your company’s processes.
Look for New Suppliers in the Right Places:
Strong supplier relationships are crucial for businesses of all sizes, from the smallest to the largest. Strong suppliers form a solid foundation on which to build a business, and often, partnering with a smaller supplier when you’re small yourself can work out well for both parties in the long run, as you support one another’s a success.
Don’t just search for suppliers on Google. Turn to others in your industry, including peers and mentors, industry-specific directors, trade magazines, professional associations, and industry blogs, and social media. They can recommend suppliers who are able to meet your requirements and who share your company’s core values.
Monitor Performance and Mitigate Risk:
You’ll need to keep tabs on how well your suppliers are meeting your expectations because that’s how you tell whether a supplier relationship is really working for your company or not.
Typically, you’ll work out performance metrics during the procurement process, and have them written into the contract so everyone knows what’s expected. Procurement management software can give you detailed reports on your suppliers’ performance and help you keep track of important contract terms and deadlines, too.
Mitigating risk can also be an important part of procurement — because a big part of the procurement process is securing your supplier relationships for the future and protecting the supply chain so you can keep getting the supplies you need. Third-party risk assessment should be part of any onboarding process, but regular assessments need to continue throughout the relationship. A risky supplier relationship is a weak supplier relationship.
Procurement management is too important not to take seriously. Your company relies on third parties to stay in business, and you need to make sure you’re nurturing those relationships as much as you can. Choose strong suppliers and protect your supply chain with vigilance against third- and fourth-party risk.
When you get the suppliers you need at the right price, from a supplier who supports your values, everybody wins.
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