Procurement managers are faced with unusual situations quite often. The very nature of their job entails an unexpected environment where changes take place abruptly and for the sake of efficiency, one needs to be prepared.
Suppliers are an integral part of the procurement system and a lot depends on the efficiency of suppliers and the services as well as goods they provide.
Most organisations grapple with the problem of unreliable suppliers, huge supplier costs and low quality of goods and services and hence forth invest in top procurement companies or the best sourcing companies.
The question then arises, what can be done to ensure that sourcing and in turn supplier management is a smooth, hassle free process.
Analysis of supplier performance is the primary step to ensure an efficient supplier function. An organization that doesn’t periodically review supplier functions tends to regret it eventually. Supplier performance needs to be understood on the basis of quality of goods, timely delivery and cost effective.
If a supplier who supplies quality goods to your organization but charges an exorbitant price; is not a value addition to your procurement process. In fact in the long run, the vendor might be a liability.
From expected cost to actual cost, purchase price variance to vendor payment history are some key performance indicators of how your organization is performing.
It is important to review payment history to ensure that delay supplier payments are not taking up huge interests and the contracts that are made up are for the mutual benefit of both organisations and vendors.
It is also crucial to conduct a comparative analysis of existing vendors and draw up a conclusion of vendors that are performing and vendors that are not contributing to the holistic growth of the organization.
Considering the trend of changing business practices and the increasing popularity of sourcing solutions, businesses have begun to outsource essential functions in an effort to focus on core areas.
Using internal resources for management of sourcing, vendors and payments takes away from the efficiency of business processes and leads to an unbalanced organization framework.
The changing trend also owes its popularity to the success of outsourcing these functions. Studies have shown a marked improvement in the performance of organizations as well as ensured the implementation of a successful vendor management system.