Supplier Management

Firms must develop strong relationships with their suppliers as it helps in growth of the business itself.  Firms can ensure an effective supplier management in the following manner:
 

 

Maintaining Good Relationship with Vendors

In order to maintain good relationships with suppliers, firms can utilise the following tips

  • Pay the bills on time
  • In case payment cannot be made on time, call the suppliers in advance and give them the reasons for late payment and the date of payment
  • Give sufficient lead time to suppliers
  • In case the goods/ services delivered are not upto expectations, discuss it with the vendors
  • Discuss your needs with the suppliers and ensure that they have understood same
  • Keep suppliers abreast of any significant changes in your company 

 

Use of Technology in Procurement

Technology can help in procurement in following ways:

  • Timely provision of information and giving order
  • Faster processing of order
  • Better control
  • Greater transparency
  • Integration of other activities like production, administration and finance with procurement/ purchase


In addition to above, use of IT in procurement can facilitate analysis of real-time information on sales and orders and improve overall efficiency of the business.

Information technology can be used for procurement either in a simple manner, through e-mailing of key documents, spreadsheets, etc or by utilizing IT solutions like Enterprise Resource Planning (ERP) and e-procurement channels.



Enterprise Resource Planning

Enterprise resource planning (ERP) is an integrated computer-based system used to manage internal and external resources including tangible assets, financial resources, materials, and human resources. Built on a centralized database and normally utilizing a common computing platform, ERP systems consolidate all business operations into a uniform and enterprise wide system environment.

 


E-procurement

E-Procurement is the purchasing of goods and services using the internet. It

  • covers full life cycle of purchasing (indent to receipt of goods), and
  • connects buyers and suppliers through electronic exchange of Tenders, catalogs, contracts, POs, invoices etc


 

Review of Vendor Performance

The performance of suppliers should be reviewed at regular intervals to ensure that procurement of goods/ services is effective in meeting the business goals.

The vendors can be evaluated on following parameters:

  • Price
  • Quality
  • Delivery
  • Feedback and discussions


Price: You must review if you are getting products/ services at the best price and at favourable terms.

Quality: You must review the quality of goods/ services delivered to you and evaluate if they are meeting your expectations.

Delivery: You must review whether the vendors are making deliveries on time and do they respond fast if any urgent delivery is required.

Feedback: You must assess if the vendors discuss their new products/ services or changes in existing products/ service with you at regular intervals. Further, review the feedback provided by suppliers with respect to orders and payments received.


In case suppliers are meeting expectations on all above criteria, the relationship with vendors should be maintained, otherwise any issues and concerns should be discussed with the vendor to arrive at effective solution. In case the issues are unlikely to be solved through discussions, one may think of terminating the contract with the supplier. There could be other reasons for terminating the contract such as availability of more reliable supplier at cheaper rates. Before ending the contract, you can provide the existing supplier the reasons for terminating; they could offer a better deal in terms of lower prices or improved quality, or both.