What is supplier management and how to improve

Supplier management is a process that most companies must carry out on a day-to-day basis, and for this very reason, it is very important to know how to get the most out of it. That is why in this article we will explain what supplier management is, why it is so important, and we will give you some tips to make the most of it.

Previously, in order to understand what supplier management is, we must know what managed IT services are, as these will be referred to throughout the article.

We can say that when we refer to managed IT services, we are talking about the total or partial outsourcing of the infrastructure and IT personnel of the company when necessary.

The infrastructure would be the set of services, technical means, and facilities necessary for the development of the company's activities.

Among the activities carried out by IT personnel are the provision of services for the development or support of programs, software, applications, and all the IT solutions that the company has, allowing customers to have added value for their projects with experts.

Managed IT services integrate the processes, people, and technology necessary for the proper functioning of the company, this is done online and with the use of software that controls all functions and departments and connects with the servers and services of the company where the managed service is provided.

‍

Once we understand all these concepts, we can ask ourselves:

What is supplier management?

Supplier management is the process by which companies develop relationships with external companies or entities to supply them with certain resources or IT services that the buying company needs for its daily operations and to achieve its objective and fulfil its mission. These external organizations that provide IT products or services to the company are called "suppliers" or "service providers," as a supplier can be either a person or a company. In addition, depending on the resources that the company needs to cover, it may have more or fewer suppliers, each of which may be different and have their own terms.

This is why we say that the set of activities and stages that the organization must carry out in order to obtain the maximum performance from the agreements it has established with its suppliers is known as "supplier management."

The activities that must be carried out in order to obtain the maximum performance from the agreements established with suppliers are:

• Researching the IT market to search and find products and services
• Provisioning and selecting suppliers
• Obtaining budgets
• Contract negotiation
• Relationship management
• Performance evaluation, usefulness, and benefit of suppliers
• Management of product deliveries and service provision
• Payment to suppliers for such products and services

Although these are general supplier management activities, it will depend on the supplying company and the agreement that has been established with it, as well as the products or services it provides, how these characteristics will be and what level of management is required.

For its effectiveness, supplier management will require skills, effort, time, and resources.

‍

Why is good supplier management important?

Benefits of supplier management

In most companies, supplier management aims to provide the lowest-cost supplier for a specific IT product or service. It is important to note that supplier management, despite reducing operating costs of an organization's IT, will rarely lead its service to excellence. To achieve excellence in service, it will be necessary for supplier management techniques to also be used to manage and process the ongoing relationship with suppliers, thus ensuring that the initial agreements are beneficial to both parties. The effective use of these processes (assuming they are effective beforehand) will ensure that these agreements are beneficial and that the quality, service, cost requirements are met, and that there is an appropriate level of satisfaction.

The use of effective supplier management processes will ensure that the quality, service, and cost requirements included in the agreements with suppliers are properly aligned with the organization's requirements and strategic objectives.

Supplier management procedures also help companies choose the most suitable suppliers in the area that needs to be covered, that is, those who are best able to meet those requirements and also manage the incorporation of their services and products into the organization's IT environment.

Also, thanks to supplier management, the company will be able to have an organized control of its IT costs, as well as managing the performance of suppliers to best follow the set objectives.

Finally, supplier management will allow for good organization, which will help prevent failures in the provision of IT services and obtain the maximum value from suppliers.

Having said that, we can conclude that supplier management will reduce your company's IT costs because:

• It will allow you to carefully select suppliers.
• Determining your objectives and selecting the most optimal suppliers after an extensive documentation process in the sector will lead to the creation of contracts that clearly specify the requirements and the management of these. This will prevent the company from incurring additional costs for concepts that were thought to be included in the contracts signed with suppliers.
• Through proper management and administration of contracts, it will also prevent the company from carrying out activities that should be performed by its suppliers.
• Supplier management, especially when carried out centrally, can also help reduce administrative costs as a common storage of information about your suppliers, both current and potential, reduces efforts in duplicating data search and reduces the margin of error.
• Using homogeneous strategies and a single reliable source of information, these techniques enable a more effective relationship with the company's suppliers.

In summary, a well-designed, planned, and executed supplier management can have many advantages. All of these culminate in increased customer satisfaction, reduced costs, quick resolution of potential problems, improved company service, and supplier service. All of this will contribute to achieving the company's objectives.

‍

What should you do to improve the management of your suppliers?

Correct selection of your suppliers

Selecting the right suppliers is the beginning of supplier management. As mentioned earlier, it is very important to extensively document the market and the sector of suppliers.

For this, the company needs personnel who can analyze the IT and company requirements, as well as agree on selection criteria and know how to search for the required products and the suppliers who can supply them. They must also be able to lead the supplier selection team so that they choose the right suppliers and design a contract that will later be beneficial for both parties, without jeopardizing any of the company's objectives.

Additionally, once those suppliers that can supply the necessary resources are found, it is important to communicate everything that is deemed appropriate.

The contract requirements and how their management will be carried out must be specified.

Remember that determining your objectives and selecting the most optimal suppliers will prevent the company from incurring additional costs for concepts that were thought to be included in the contracts signed with suppliers.

Thus, we can conclude that optimal suppliers will be those who are best able to meet the company's requirements and also manage the incorporation of their services and products into the organization's IT environment.

The supplier selection strategy of any company should allow sufficient time to carry out each step, review the organization's progress, and continuously compare it with its IT environment and objectives, so that in case of deviation, it can act and adjust as needed. If any of these processes are compromised due to time constraints, it is unlikely that supplier selection will yield positive results.

If a company chooses to select its suppliers without any prior documentation or preparation, supplier management is likely to not yield optimal results.

‍

Establish transparent communication

It is necessary to share all relevant information with the organization's suppliers if you want them to perform their functions in the most suitable manner. Additionally, this information must be easy to understand (and therefore well exposed). For this reason, it would be ideal to set aside the jargon used only within the organization and instead use a vocabulary that is understandable to everyone. In the case of using the organization's jargon or acronyms, it would be a good idea to provide suppliers with a summary or glossary of words, acronyms, or abbreviations that the company uses in its activities.

Likewise, it will be necessary to transmit to the organization's suppliers information about the company's IT, its operating model, short-term sales forecasts, or any other relevant information that could affect the supplier's service.

On the other hand, trust between the supplier and the company is vital for proper supplier management. A lack of trust in the suppliers usually results in inefficiency. A lack of trust in a company's suppliers can result in labor overhead costs, which would come from the need for constant verification of the quality of the services provided by the suppliers.

This extra burden in supplier management can be avoided by adopting a strategy that manages supplier relationships and encourages constant communication and trust between both parties.

Finally, we must not forget that good communication is bidirectional, so it will be necessary to understand the company's suppliers well, as this helps establish better relationships. You will know if you have established correct communication with your supplier if not only it receives information from your organization but also if you know what motivates your suppliers, what are their business objectives and aspirations with your company, and also know their jargon (if they use one).

Good communication with your suppliers will not only save calendar or unit failures and establish a correct execution of their processes, but will also help in negotiating prices more easily.

‍

Evaluate the performance of your suppliers

An evaluation of the performance of your suppliers is absolutely necessary. Just as quality controls are carried out after processes, it is optimal to review the processes used by your company's suppliers and how they are being executed to find areas for improvement or new approaches that will provide greater profitability.

It is important to highlight that a process can be effective, but it may not be the most efficient. For this reason, it is important to conduct periodic checks and evaluate your suppliers and their processes, as they may be effective, meaning the work is carried out correctly and the proposed objectives are achieved, but they could be more efficient, meaning that the company's objectives could be achieved in a more cost-effective way that would result in lower expenses.

As we have mentioned, it is good to have stable relationships with your suppliers, as this implies a higher level of trust and, consequently, better communication. However, it is necessary to remain attentive to the market of what your supplier provides, what is offered, and how much is charged for it. This is important because sometimes if our suppliers' performance is correct, we do not investigate further, but rather we become complacent and do not adjust prices or processes to the market. It is not necessary to change suppliers, in fact, it is not recommended, but it is essential to evaluate and communicate what is necessary.

‍

Up-to-date control of accounts payable

Problems related to supplier payments can affect the operation of a company, as in certain cases, it can lead to a shortage of resources that the company uses to carry out its activities.

An up-to-date control of invoices and budgets will ensure that there are no doubts or misunderstandings when the time comes. Furthermore, it will also allow the organization to know its total costs in the supplier sector and open doors to improving or reducing fees if negotiation is considered.

To ensure that the organization can address any situation, it is essential to forecast cash flow. It is also necessary to monitor the company's payment and collection lines and terms to be able to communicate and modify (if necessary) those that do not fit within the established parameters.

‍

Rely on technological solutions to automate processes

It is essential to adapt the company year after year, grow with the market, and adjust to the present. Nowadays, there are automation systems for the tasks and services of a company that reduce costs and time spent on carrying out a process.

Investing in technological solutions to automate processes and intermediations with the suppliers of your company can be very beneficial. There are software programs that allow constant and immediate online communication with your suppliers, where dates and rates are automatically updated. These software programs also provide order, which is absolutely essential if you want to speed up certain processes (and consequently minimize the time spent), as well as provide less margin for errors and misunderstandings.

‍

Supplier management software

As we have mentioned in the previous point, there are company management software programs that allow the management of suppliers, customers, employees, and company services. Furthermore, many of these software programs enable the control of all the company's budgets and invoices, including those of the suppliers. This is how these software programs can be very beneficial for controlling and managing supplier management at the same time.

‍

taclia as supplier management software

taclia is an example of the different company management software programs that we can find on the market.

taclia allows you to facilitate and carry out proper supplier management, as well as control invoices, services, employees, and customers of your company. This software program allows you to customize the system to the needs of your company, as well as have your customers, suppliers, and employees connected in one place.

taclia manages all your daily tasks and services, allows you to track employees and suppliers, also, it allows you to create, manage, and send budgets and invoices, access automatic reports where all your service data is centralized so you can make decisions and know what is happening in your business every day, and many other features.

‍

Like taclia, there are many other supplier management software programs. For this reason, it is necessary to conduct a research process to reach the one that best suits the needs of your company.