Supplier management process handbook

Overview

This introduction describes the principles of strategic supplier management. The target audience is all stakeholders not part of the supplier management team. The introduction highlights the essential basics, background, and necessities of strategic supplier management.

Why supplier management?

  • Supplier management manages, controls, and maintains the relationships with suppliers on a strategic-conceptual level.
  • Supplier management doesn’t organize the day-to-day collaboration with the supplier, but ensures that the collaboration is good in the long term.
  • Supplier management develops suppliers in such a way that their contribution to the success of the buyer organization grows in the medium to long term.
  • Supplier management is a central management and escalation instance in case of problems with cooperation with a supplier.
  • Supplier management works together with the sourcing & procurement function to find and evaluate future suppliers with the aim of purchasing valuable solutions.
  • Supplier management evaluates current and potential suppliers in terms of their contribution to the organization.
  • Supplier management develops proposals for (re)tendering services in order to improve the quality and price of solution purchasing.
  • Supplier management carries out an innovation process in collaboration with existing and potential suppliers in order to identify innovation potential and prepare for its realization.

Operational vs. strategic supplier management

  • Operational supplier management is a component of other IT management processes and functions.
  • Operational supplier management is comparable to internal operational IT management processes (e.g., incident, change, asset management), with the difference that the organization cooperates with an external organization for service provisioning.
  • Operational supplier management is responsible for cooperation with an external supplier, in the context of operational service provision and the related management processes.
  • Strategic supplier management maintains the relationship with external suppliers at a higher management level.
  • Strategic supplier management ensures that the external suppliers deliver the agreed service with the agreed quality.
  • Strategic supplier management ensures good long-term cooperation with external suppliers, for the purpose of further cooperation and the development of innovations for the customer organization.

Responsibilities of the strategic supplier management

  • Strategic supplier management collects expectations about external suppliers from the internal stakeholders and incorporates them into the further development of supplier contracts.
  • Strategic supplier management maintains information on existing supplier relationships in a central information repository.
  • Strategic supplier management researches missing information and documents and, if necessary, requests these from suppliers.
  • Strategic supplier management records the status of individual contracts, services, and suppliers and determines the respective operational and strategic management maturity levels.
  • Strategic supplier management serves as a centralized management layer between the internal organization and the supplier organization.
  • Strategic supplier management improves cooperation with external suppliers.
  • Strategic supplier management works as a central escalation authority for serious and/or persistent issues that operational teams cannot resolve at their level.
  • Strategic supplier management modularizes, systematizes, and standardizes contract templates for sourcing if no stand-alone contract management exists.
  • Strategic supplier management supports operational supplier management by providing methodologies, processes, and software tools.
  • Strategic supplier management promotes joint learning and continuous development of the organization and the supplier organization (for the benefit of the organization).
  • Strategic supplier management evaluates suppliers and their performance on a regular basis, taking into account the assessments of the personnel who work operationally with the suppliers.
  • Strategic supplier management promotes the development of supplier innovations for the customer organization.
  • Strategic supplier management develops processes and software tools that suppliers use to provide information.
  • Strategic supplier management may take over other areas such as sourcing, contract management, and/or innovation management if these areas are not developed as separate teams.

Methodology and approach

  • Strategic supplier management can be ad-hoc and controlled, with the latter representing a higher level of capability maturity.
  • Strategic supplier management is done through conversations, written communication, and document development.
  • Google/Microsoft Forms is a software solution for forms, which organizations can use for modularization, systematization, and standardization of information inputs.
  • The advantage of Google/Microsoft Forms is the harmonization of information and the separation between form and information access.
  • In comparison to Microsoft Excel or wiki software, the information-entering users always have access to the other users’ information as well, which is to be avoided in case of confidential information or supplier assessments.
  • The supplier management form is divided into sections, each of which serves a specific task.
  • The supplier management form serves the tasks described in the corresponding handbook.
  • The supplier management team is responsible for processing, evaluating, and communicating information entered by form users.
  • The supplier management team further processes the received form information in various ways.

Possible extensions

  • The supplier management team decides on further information processing after input into the form.
  • The "Information management" document provides information on the options for further information processing after input into the form.
  • The supplier management team can extend the provider management framework with additional sub-processes or task areas as required.
  • Microsoft Forms has certain limitations regarding the number of questions in a form, which the supplier management team can circumvent by using several forms.

Related processes

  • Related topics are strategic sourcing and operational procurement.
  • In the area of technology services, a service catalog is helpful in order to provide an overview of purchased services and services for sale and to make economic and technical dependencies transparent.
  • For purchasing-related processes such as requirements elicitation and proof-of-concept projects, the organization must decide which team will take the lead in deciding on information models and processes.
  • The organization decides which team will perform the task of capturing and maintaining potential future suppliers through market exploration and requests for information.
  • The capture and maintenance of possible future suppliers is closely linked to innovation and partner management and should therefore be decentralized with a central management level.
  • The organization should limit the already lateral function of provider management to specific subject areas, rather than transferring too many different additional subject areas.
  • Operational process areas and content-related transformation tasks should be carried out by appropriate other teams, using external services if necessary.
  • If there are a certain number of external suppliers, the scope of supplier management tasks should not be overloaded in order to enable further development in addition to day-to-day business.

Supplier management and operational teams

  • The operational teams manage their suppliers independently at the operational level and at the strategic level in accordance with the specifications of the supplier management team.
  • The operational teams and the supplier management team integrate the operational processes of the teams with the operational and strategic processes of the supplier management team.
  • The operational teams pursue the goal of harmonizing their operational processes for supplier management in order to reduce complexity within their own organization and implement strategic supplier management without process exceptions.

Supplier management and strategic sourcing

  • Strategic sourcing supports the operational departments in selecting and contracting suppliers.
  • The supplier management team incorporates new suppliers into the supplier management process after the contract is signed.
  • Strategic sourcing communicates the supplier management process to suppliers during the purchasing process so that suppliers can include it in service delivery.

Supplier management and operational procurement

  • Operational procurement executes the purchase orders of contracted services.
  • The supplier management team supports operational procurement by providing contract information and pointing out potential challenges in the purchase order process.
  • Operational procurement and supplier management coordinate their process interfaces.

Supplier management and innovation management

  • Innovation management searches for and evaluates innovations to be purchased (instead of developed in-house).
  • Supplier management takes care of potential suppliers and their services.
  • Supplier management focuses on service providers (consulting, outsourcing) and innovation management on new technology vendors, business models, and customer solutions.

Supplier management and process management

  • Process management describes the interfaces between supplier management and other functions/processes/teams.
  • Due to the large number of interfaces between supplier management and other functions/processes/teams and the large number of stakeholders, cooperation with the process management team is particularly important.
  • Process management advises supplier management on the further development and integration of supplier management forms and the further processing of captured information in other software solutions.

Summary

  • Supplier management has been an underdeveloped capability whose value increases with the number and volume of supplier relationships.
  • With the current emerging shift to smaller agile supplier contracts, the relevance of central coordinating supplier management is also increasing.
  • The principle of subsidiarity is maintained with the operational management of suppliers in the specialist departments.
  • Strategic supplier management doesn’t replace the operational departments but complements them with a central management level.
  • Strategic supplier management has the potential to create significant value for the organization at a time when external supplier relationships stay relevant and are becoming more complex.

Outlook

  • As the maturity of supplier management increases, so will its value contribution to the organization.
  • Supplier management has the potential to take on additional tasks (e.g., innovation management)
  • Supplier management can perform additional tasks/functions that are not done by someone else in the organization.
  • With an increasing number of supplier relationships and the importance of these for a faster-moving organization, the relevance of supplier management for the organization will increase.