Oct 6, 2022 | Supplier Management
Estimated reading time: 5 minutes
• Efficient and well-ordered suppliers are worth their weight in gold. In an increasingly competitive world, establishing favorable relationships with such high-caliber suppliers is imperative for good business.
• But who or what are suppliers? And why are they so important?
• In this post, we are going to answer two major questions: What are suppliers in supply chain management? And, what role do they play?
What is a Supplier?
Investopedia.com gives us a comprehensive definition of what a supplier is:
“…a supplier is a party in the supply chain that makes goods and services available to companies or consumers.”
Suppliers are also called vendors and the two words can be used interchangeably. Vendors can be both sellers of finished products and a manufacturer of goods.
What is the Role of a Supplier?
Suppliers in supply chain management have multiple roles. We’re going to look at six of them.
1. Regulatory Compliance
The responsibility of ensuring goods and services is manufactured or provided in a manner that is compliant with state and federal laws falls upon vendors.
What laws exactly do suppliers need to be mindful of? Well, every standard from human rights (child labor and fair labor practices) to safety.
And that’s not all, if they are selling their products regionally and internationally, this may entail having to be aware of regional treaties and local business laws in the countries they also do business in.
2. Value for Money
The demands of suppliers are tight. One of them is being able to help organizations save money and improve their bottom line by presenting goods and services of high quality at reasonable prices. Businesses are fickle and will have no problem opting for a cheaper vendor if the product quality is the same and the prices offered are lower.
3. Non-Discriminatory Practice
Suppliers are bound to operate in a fair and equitable manner catering to retailers from a variety of backgrounds. Organizations should each be given an opportunity to source their needs from suppliers without fear of being discriminated against if they have the capacity to acquire required inventories.
4. Improving Freight Facilities
A vendor may consider the various means of transportation that are being employed to deliver goods. Because there are strict deadlines in place, it’s key that transportation facilities are always being evaluated and refined to ensure goods arrive on time at factories, warehouses, and distribution centers.
5. Inventory Management
Inventory management is the practice that helps suppliers know what stock they have and how much of it they have at any given moment in time. This pivotal tracking ensures that there is no disruption in the supply chain because of a lack of raw materials or goods.
6. Fulfilling Product/Services Demands
Fulfillment is also a major responsibility of suppliers. Vendors can take on the role of receiving, packaging, and shipping orders for goods depending on their agreement with organizations.
The Importance of Suppliers in Supply Chain Management
Suppliers are at the top of the supply chain network. Without them, the entire network would collapse and cease to function.
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You see, the supply chain has as its source the supplier. So, no suppliers mean no raw materials/services for manufacturers and ultimately no goods being delivered to the consumers.
The empty shelves witnessed in major retail stores at the start of the COVID-19 pandemic, triggered by panic buying, are a clear example of what happens when there’s a disruption in the supply chain and vendors are affected and can’t meet demand.
Suppliers had to halt (or severely minimize) operations and the impact was felt all the way through the supply chain, eventually reaching the consumer.
Read more: Purchasing and supply chain management in 2020
Supplier Relationship Management Process
We cannot talk about the role of suppliers without addressing the supplier relationship management (SRM) process. But just what is supplier relationship management?
It is a pragmatic and methodical approach to appraising suppliers providing raw materials, goods, and services to businesses; governing each vendor’s contribution to an organization’s success, and generating strategies to refine their performance.
The SRM process can be split as follows.
1. Classifying Suppliers According to the Importance
Go through your list of suppliers. Allocate a category of importance to each supplier. This segmenting of suppliers will assist you in seeing who is actually adding value to your business and which suppliers can be let go.
Read more: Category management process in procurement
2. Determining Supplier Expectations and Governance
How do you propose dealing with each supplier? How can you effectively gauge performance? The best way to do both of these things is by developing robust supplier strategies complete with expectations. It’s vital that you have performance metrics against which you can critically assess every supplier on your list.
3. Implementing and Evaluating the Supplier Strategy
A strategy is only as good as its execution. Once you’ve got the strategy put it to the test. Delegate responsibility to qualified people who are able to competently evaluate the suppliers and measure the overall success of the strategy.
Good Supply Chain Management Begins with Reliable Procurement Solutions
If you’re set on improving your supplier relationship and by extension, your supply chain management process, you’re going to need a reliable procurement solution.
ProcurePort prides itself on providing organizations large and small with the necessary software to competently manage all their procurement functions.
Trusted by organizations such as UNOPS, HUD.GOV, and conEdison, look no further.
To view our solutions in action, schedule a free demo today. Alternatively, contact us to discuss a tailored procurement solution.
