SSM Book U2

RVS Institute of Management Studies
(Approved by AICTE, New Delhi & Permanently Affiliated to Anna University, Chennai),
Kumaran Kottam Campus, Trichy Road, Kannampalayam, Coimbatore-641 402.
BA4052 SOURCING AND SUPPLY organization. Also known as procurement,

MANAGEMENT supply management includes the purchase
of physical goods, information, services,
UNIT - II STRATEGIC SOURCING and any other necessary resources that
enable a company to continue operating and
Supply Management and growing.
Commodity Strategy Development,
Supplier Evaluation and Selection Supplier Supply management is a systematic
Quality Management Supplier business process to pursue and manage
Management and Development, Creating a resources for a company's operations. Also
World-Class Supply Base, Worldwide known as procurement, it's an important
Sourcing. function that allows businesses to operate
and grow. If you're considering a career in
Key Objectives: this area, gaining knowledge about this
important business process may help you
 Minimize expenses and enhance achieve success.
financial efficiency by negotiating
favourable terms, exploring cost- Supply management refers to
effective alternatives, and streamlining finding, acquiring and managing resources.
procurement processes. A business requires the purchase of goods,
 Cultivate strong partnerships with key services and information to maintain its
suppliers to improve collaboration, growth. Purchasing these necessities
increase flexibility, and drive mutual systematically allows businesses to thrive
success. and develop. The concept of procurement
 Identify and manage risks within the goes beyond purchasing products and
supply chain, including geopolitical, services. It involves functions such as
economic, and operational risks, to logistics coordination and inventory
ensure resilience and continuity. management. It also affects budgets and
 Ensure the procurement of high-quality employees. Successful procurement may
goods and services by selecting reliable lead to greater business productivity and
suppliers and implementing measures increased revenues.
to monitor and improve product and
service quality. UNDERSTANDING SUPPLY
 Foster innovation and incorporate MANAGEMENT:
technological advancements into the
Most people consider supply chain
supply chain, collaborating with
management as the way corporations buy
suppliers to stay ahead of industry
raw materials and finished goods. But
trends and maintain competitiveness.
supply management is more than simply
SUPPLY MANAGEMENT: buying products and contracting for
services. It is a systematic business process
The term supply management refers that goes further than procurement to
to the act of identifying, acquiring, and include the coordination of pre-production
managing resources and suppliers that are logistics and inventory management, along
essential to the operations of an with budgeting, employees, and other key
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SOURCING AND SUPPLY LOGISTICS AND SUPPLY CHAIN G. KATHIRESAN, ME.,MBA
MANAGEMENT MANAGEMENT Assistant Professor - RVSIMS
information to keep the business running production, and distribution of products,

smoothly. goods, and services.
The main goals within supply Supply chain management requires

management are cost control, the efficient suppliers and managers to be as efficient as
allocation of resources, risk management, possible. This means they must make sure
and the effective gathering of information activities are streamlined so there are no
to be used in strategic business decisions. shortages, costs are kept down, and
businesses can remain competitive in the
Oversight and management of market.
suppliers and their contributions to a
company's operations, for example, should TYPES OF SUPPLY MANAGEMENT:
be of paramount importance. Supply
management personnel within a company Companies may categorise their
or institution are generally responsible for procurement activities according to the type
the following: of resources or the way they plan to use
these resources. The following are some
 Identifying, sourcing, negotiating, and ways organisations may classify these
procuring a service or good that is activities:
essential to a company's ongoing
operations according to the wishes of Direct procurement: This refers to the
the organization's leaders and acquisition of resources that businesses
supervisors. require to produce an end product, such as
 Formulating a strategy for developing manufacturing components and raw
and maintaining relationships with materials.
suppliers—and then executing on it—as
Indirect procurement: This covers
well as holding suppliers accountable.
purchases of items that don't contribute
 Utilizing technology and procedures directly to a company's earnings but are
that facilitate the procurement process. necessary for its daily operations, such as
 Considering the theories of supply and office furniture and equipment
demand and what influence they have maintenance.
on supply management.
Goods procurement: This refers to buying
SUPPLY MANAGEMENT VS. physical items. It may also include
SUPPLY CHAIN MANAGEMENT: purchases of software subscriptions and
renewals.
The terms supply management and
supply chain management are sometimes Services procurement: This refers to the
used interchangeably. But there is a purchase of people-based services, such as
difference. Supply chain management legal consultancy or security.
actually refers to the management of how
goods and services flow through the WHY IS SUPPLY MANAGEMENT
production process—from raw material to IMPORTANT?
finished goods that end up in the hands of
consumers. This includes shipping,
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Managing resources and suppliers Procurement is an ongoing business

effectively is key to achieving business function that encompasses a range of
efficiency. The ability of an organisation to activities to obtain goods and services.
accomplish its procurement goals may Different companies may have different
directly affect its business performance or definitions of what activities are part of the
stock price. The following are some reasons procurement process. The following are the
why this business function is important: steps of a typical procurement process for
an organisation:
Controls cost :
1. Identify goods and services that a
Businesses that execute outstanding company requires
procurement strategies may reduce their
operating expenses and improve their The first step is to identify specific
profitability. Cost control is necessary to goods and services that a company needs.
maintain and grow profits. Executing this This may refer to the purchase of new items
business function successfully may help or restocking of existing items. It's
drive business performance by identifying important that business departments
and reducing business costs. contribute to this decision-making process
so that the resources they purchase reflect
Allocates resources efficiently their requirements.
Companies with well-coordinated 2. Submit purchase requisition

procurement processes may find it easier to
allocate resources efficiently to achieve After deciding on the required
business goals. For example, a resources, the employee or business
manufacturer may decide what raw department may make a formal purchase
materials to use for their products. When a request to the purchasing manager. This
company adopts best practices to buy informs management of the reasons for the
suitable raw materials, it may achieve purchase and the specifications of the item,
greater value for money for its limited such as price and quantity. The purchasing
budget. department may then approve or deny the
request.
Manages risk
3. Evaluate and choose vendors
Well-managed processes in
procurement can help reduce business risks After receiving approval, the next
through different strategies. For example, a step is to find suitable vendors who can
business may take steps to ensure supplier fulfil the purchase requirements. The
quality, evaluate supply risks and diversify purchasing department may provide
its sources. Doing this may contribute to a suppliers with details of their requirements
company's overall goals by minimising and request a quote. The evaluation of
disruptions through mitigating supply risks. vendors may consider factors such as cost,
reliability, speed, quality and reputation.
STEPS IN THE SUPPLY Some companies may consider ethics too,
MANAGEMENT PROCESS
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preferring to source their supplies from discrepancies among the three documents,
socially responsible companies. it's important to resolve them before
authorising payment.
4. Negotiate price and contract terms
8. Approve invoice and make payment
The business department may
consider several quotes before making a If there aren't any errors, the
decision and negotiate with certain purchasing department may then approve
suppliers for better contract terms. After and pay the invoice. It's important that
agreeing on the terms, a company signs a companies implement a consistent invoice
contract with a supplier. The contract lists payment process to ensure that payments
detailed terms and conditions, such as correspond to the invoice amount and due
information on payment terms and date. Paying on time may help avert late
penalties for supplier non-performance. fees and contribute to positive supplier
relationships.
5. Create a purchase order
9. Maintain records
The next step is to create a purchase
order for submission to the supplier. This Maintaining and updating records
document provides detailed information for the entire procurement process is an
about the quantity of specific goods on important function. These records may be
order and the delivery timeframe. The useful when businesses reorder goods and
supplier fills the order according to the services or negotiate new contracts. They're
company's requirements. also necessary for auditing, tax calculation
and performance reporting.
6. Receive and examine delivered goods
COMMODITY:
Upon receipt of the items, it's
important to inspect the deliveries for A commodity is a basic good that is
damage or errors. It's also essential to check used in commerce and can be traded on a
that the delivered goods match the commodities market. Commodities are
description in the purchase order. If the typically raw materials or agricultural
quality doesn't meet expectations, the products, but they can also be precious
purchasing department may not sign off on metals or energy sources.
the delivery.
Some examples of commodities include:
7. Perform three-way matching
-Crude oil
Three-way matching is the process
whereby the accounts payable department -Natural gas
compares the purchase order, receipt and
-Corn
supplier's invoice. This is to ensure that the
goods or services they receive match the -Soybeans
descriptions on the purchase order. It also
prevents unauthorised payments or -Wheat
incorrect invoices. If there are
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-Coffee beans employed, and the best strategy for any

given situation will depend on a number of
-Sugar factors including the investor’s goals, risk
tolerance, and time horizon. Some common
-Gold
commodity strategies include:
-Silver
– buying and holding commodity
COMMODITY STRATEGY futures contracts
DEFINITION:
– using technical analysis to try and
A commodity strategy is a risk predict future price movements
management plan that seeks to reduce the
– spread betting or CFD trading
price volatility of one or more raw materials
used in production. The goal is to ensure Each of these strategies has its own
that the company has a reliable and merits and drawbacks, and there is no “one
consistent supply of these materials, at a size fits all” solution when it comes to
predictable and manageable price. There commodities investing. In general, though,
are two main types of commodity a good commodity strategy should aim to
strategies: hedging and diversification. provide both upside potential and downside
protection against adverse price
Hedging involves taking out
movements.
contracts to buy or sell a commodity at a
fixed price, to protect against price DIFFERENT TYPES OF
fluctuations. On the other hand, COMMODITY STRATEGIES:
diversification involves investing in a range
of different commodities to spread the risk. A commodity strategy is an
The most important thing to remember investment and hedging portfolio that
when developing a commodity strategy is includes physical commodities and
that no two companies are the same. What derivatives.
works for one company might not work for
another. It’s important to tailor your The different types of commodity strategies
strategy to your specific needs and goals. are:
Commodity strategies are created in 1) Momentum-based strategies: These

order to find and take advantage of are based on the premise that price changes
opportunities in the commodities markets. in the short term tend to continue in the
These strategies can be used by investors same direction in the long term. This type
who wish to speculate on commodity of strategy seeks to profit from upward or
prices, or by companies that wish to hedge downward trends in prices by buying (or
their exposure to commodity price changes. selling) commodities that are expected to
increase (or decrease) in value.
COMMODITY STRATEGY:
2) Value-based strategies: These are
There are a number of different based on the idea that commodity prices
types of commodity strategies that can be tend to revert back to their mean or average
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over time. This type of strategy looks this case, “commodities” do not refer to
to buy commodities when they are traditional commodities such as copper,
undervalued and sell them when they are ore, cotton, or barley. The term
overvalued. “commodity” in this case refers to
categories or groups of suppliers or
3) Carry-based strategies: These seek to services, which of course include
profit from the interest rate traditional commodities.
differential between two currencies or
commodities. For example, a carry trade Due to the highly competitive
might involve buying a currency with a nature of today’s global market, it’s often a
high interest rate (like the Australian dollar) requirement to have your purchase/SCM
and selling a currency with a low interest (Supply Chain Management) team develop
rate (like the Japanese yen). Commodity focused concepts and methods and apply
carry trades can also be created using them to your purchasing behaviour. A
futures contracts. commodity sourcing strategy is based on
the CSSP (Category Sourcing Strategy
4) Spread betting: This is a type of Plans) that ensures the use of systematic
speculative trading that involves placing processes for developing the sourcing
bets on the direction of price movements strategies to achieve your SCM goals,
for a particular commodity or security. If supporting your company objectives.
the bet is successful, the trader will make a
profit; if it is unsuccessful, they will incur a PROCESS OF DEVELOPING A
loss. Spread betting is popular among day COMMODITY SOURCING
traders and those who trade using leverage, STRATEGY
as it allows them to magnify their profits.
The success of your commodity
DEVELOPING A COMMODITY sourcing strategy relies on maximizing the
SOURCING STRATEGY: cost-reduction advantages of leveraging
combined buying power for volume
Strategic sourcing involves taking a discounts, using market experts, utilizing
strategic approach to selecting suppliers – existing commodity price indexes,
an approach that is more aligned with an observing commodity price trends, and
organisation’s competitive strategy. forming strong, long-lasting relationships
Strategic sourcing can be described as with preferred suppliers.
reflecting the integration of a procurement
or sourcing strategy with the corporate Commodity sourcing strategies
strategy. require a distinct strategy planning
developed for each specific group of
One example of strategic sourcing supplies or services. It’s important to
is a commodity sourcing strategy. A always stay updated around everything
commodity strategy, sometimes referred to regarding the specific category or group.
as a “commodity sourcing strategy”, is The information consists of, among other
simply a purchasing strategy to procure things, commodity index and commodity
quality supplies and services at the lowest price developments/trends, and can be
commodity prices. It should be noted that in gathered in different ways. The most
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important thing is that the information is chain, such as assembler, manufacturer, or

shared and used internally to continuously distributor.
evaluate and improve the commodity
sourcing strategy.
STEP 1: SPEND ANALYSIS STEP 3: IDENTIFYING AND

DOCUMENTING COST AND
Performing a spend analysis is the PERFORMANCE DRIVERS
first step towards integrating your
organisation’s sourcing commodity You need a thorough understanding
strategy with your competitive strategy. It of relevant cost drivers and other important
forces your organization to analyze all the performance metrics such as quality, level
goods and services that are being purchased of technology, flexibility, and timelines.
and are forecasted to be purchased in the We suggest mapping the manufacturing
near future. The spend analysis should process and document all available
cover the total purchases across all technology options at each stage of the
divisions within your organization for both process to get a better insight into the
supplies and services. It should reflect the different cost and performance drivers
total cost of ownership and not just the using different commodity price indexes,
purchase price. graphs, and other information and data
sources regarding commodity price trends
The output will be a complete, and similar factors.
documented understanding of your
organization’s past, present, and future STEP 4: SUPPLIER ROLE ANALYSIS
purchases for supplies and services.
Segment the supplies or services
STEP 2: INDUSTRY ANALYSIS across a set of supplier roles to determine
the type of required suppliers and the roles
Examine the supply industry to each supplier should play in the supply
determine major suppliers of the specific chain. This step may involve thinking in
supply or service by market share or terms of sub-commodities or end-users, or
geographical region. Your industry analysis by stages of the product life cycle.
should consider all various competition Whichever method you chose, the most
dynamics. We recommend using Porter’s important thing is to segment the spending
Five Forces of Competition – customer by suppliers reflecting the cost drivers you
power, supplier power, inter-company identified in the previous step. The different
competition, the threat of substitution, and cost drivers, sub-commodities, or life cycle
new market entrants. may indicate the need for a separate
sourcing strategy for each sub-commodity
The output of the industry analysis or life-cycle segment.
should reflect a diagram of the supply
industry for the specific product or service
which highlights the flow of product from
key suppliers to major customers, as well as
what role each company plays in the supply
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STEP 5: CONFIRM THE savings. The tasks need to reflect activities,

ALIGNMENT OF BUSINESS resources, and milestones for achieving
PROCESSES your savings targets.
Once the supply or service cost PROS AND CONS OF A

drivers and performance metrics have been COMMODITY STRATEGY:
identified, and the supplier types and roles
are determined, the next step is to confirm When it comes to commodity
if your organization’s business processes investing, there are pros and cons to
are properly aligned, prioritized, and consider before committing to any one
integrated. The focus is to use the analysis strategy.
of cost drivers and supplier roles to realign
On the plus side, a commodity
the business process priorities to correctly
strategy can add diversification to a
reflect the desired degree of integration
portfolio and provide exposure to assets
with your selected suppliers.
that may be less volatile than stocks or
The output will be a determination of which bonds. Commodities can also act as a hedge
business processes should be realigned to against inflation.
be able to integrate better with suppliers,
On the downside, commodities are subject
thus committing to a cooperative, long-
to the vagaries of supply and demand,
lasting relationship and creating a
which can result in great swings in price.
competitive advantage.
They may also be less liquid than other
STEP 6: SAVINGS investments, making it difficult to sell when
QUANTIFICATION prices are down.
Quantify potential savings to ensure Before diving into a commodity

that the commodity sourcing strategy strategy, be sure to do your homework and
results in measurable saving. Use those understand the risks involved.
saving targets as a metric for measuring the
SUPPLIER EVALUATION:
process of the strategy, and for “selling” the
resulting commodity strategy to senior
Supplier evaluation is the process
organizational management.
organizations use when choosing vendors
and suppliers for their products or
STEP 7: IMPLEMENTING THE
materials. During this process, a company
STRATEGY
might evaluate certain criteria to determine
Implementing the commodity which vendor can best help it achieve its
strategy should be approached in the same business goals. Here are several criteria you
way as any other major project. Using a might use to evaluate a supplier, including:
formal project management methodology
and associated tools will ensure a Price: Suppliers offer various price ranges
successful implementation. This usually for the same products. Monitoring prices
entails dividing the planned strategy into a frequently helps you identify changes in
set of tasks that will result in the targeted market demands or availability.
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Quality: Product quality provides a selecting suppliers that meet your specific
qualitative measurement of how durable or requirements.
effective a supplier's product is. You might
request samples to evaluate quantity before There are many factors to consider
purchasing. when selecting a supplier, such as quality,
price, delivery time, and potential conflicts
Service: Consider evaluating the service a of interest. It is important to choose a
supplier provides before working with supplier who can provide the necessary
them. Service criteria might involve products and services at a competitive
friendliness, responsiveness and an overall price.
understanding of the company's needs.
It is also important to evaluate the
Social responsibility: Companies may supplier’s history and track record. It would
value suppliers whose values and mission help if you investigated whether the
align with their own. Social responsibility supplier has been reliable in delivering on
can include a supplier's community past commitments. Additionally, it would
involvement and contributions to charities. help if you examined how well the supplier
responds to customer feedback.
Convenience: For companies in need of
frequent supplies, convenience matters. Ultimately, choosing a qualified
You might evaluate how easy it is to order supplier is essential for success in sourcing
products, how quickly you receive supplies goods and services.
and how willing a supplier accommodates
your employer's needs. THE FOUR STEPS OF SUPPLIER
SELECTION AND EVALUATION
Flexibility: Flexibility shows a supplier's
ability to scale deliveries up and down The four steps of supplier selection
based on business needs. This can be an and evaluation are as follows:
important criterion if productivity
1. Determining the need for a supplier.
fluctuates throughout the year or if several
locations require deliveries. 2. Conducting a feasibility study to see
if the supplier can meet the needs.
Risk: As many businesses rely on their
suppliers to provide their own customers' 3. Evaluating the quality of the
products, understanding the risk can help supplied product or service.
you determine if they're the right supplier.
You might analyse the risk of price 4. Selecting the best supplier based on
increases or supply availability. the results of step 3 and other
factors such as price, delivery, and
SUPPLIER SELECTION AND convenience
EVALUATION:
SUPPLIER SELECTION PROCESS:
Supplier selection and evaluation is
the process of identifying, evaluating, and Suppliers are an integral part of any
business, especially manufacturing.
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Supplier selection is the process of finding SUPPLIER SELECTION PROCESS:

the right supplier for your business. It
encompasses all the steps taken to find, 1. Establish Requirements
select, and work with a supplier.
The first step in the supplier
Supplier selection is an essential selection process is defining your
part of making your product successful. requirements. This means understanding
The key to selecting the best suppliers is exactly what you need from your suppliers.
understanding what you need from them. You may have a general idea of what you
need but not know how to get it.
Before choosing which suppliers to
work with, there are many factors to 2. Establish Supplier Selection Criteria
consider. Here are some things you should
think about when selecting suppliers: Once you've established your
requirements, you'll need to decide on the
 What are your end goals? criteria used to measure whether or not a
 Who will you be partnering with? supplier meets these requirements. These
 How does this affect your supply chain? criteria must be clearly defined so that
 What do you need from the supplier? everyone involved in the selection process
 How can they help you achieve those understands what they mean. For each
needs? selection criteria, establish the weightage as
 What kind of relationship do you want well.
to build with the supplier?
 Are there any potential risks that could There are many different types of
arise? criteria used to select a supplier. These
include price, quality, service, delivery,
A well-designed supplier selection reputation, etc. Some companies will use all
process will ensure the right products and of these criteria, while others may only
services are delivered at the right price, on focus on one or two. It depends on what
time, and according to specification. they want from their supplier.
WHAT MAKES A GOOD SUPPLIER? For example, suppose you're

looking for a supplier who provides a
A good supplier has the following quality product at the lowest price and
qualities: faster delivery. In that case, you might use
the following criteria as a basis for
 Is reliable and trustworthy choosing a supplier:
 Can deliver quality products or services
 Can provide support if needed Price - 20%
 Will honor its commitments
 Offers competitive pricing Quality - 20%
 Provides timely delivery
 Accepts returns without hassle Delivery - 20%
 Has a strong reputation
Lead time - 10%
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Responsiveness - 10% 4. Make a Short List of Suppliers
Capability - 10% Now that you've identified potential

suppliers, make a shortlist based on the
Capacity - 10% information gathered during your initial
investigation. It's important to keep in mind
3. Identify Potential Suppliers that the purpose of this stage is to narrow
down your options. Remember that the goal
After establishing your criteria, here is to eliminate all those options that
you'll need to start identifying potential will not work for you.
suppliers. There are a few ways to go about
doing this: 5. Select Your Final Supplier
a) By using existing networks - This should The final step in the supplier
be the first choice. Check with your current selection process is selecting the best
suppliers if they can provide the specific supplier. For supplier evaluation, you have
product or service you are looking for. several options available, depending on
how much time you have available.
b) Online search - Use online sources such
as Google, LinkedIn and social media sites a) Negotiate - Negotiation is the most
to source potential suppliers. common method of selecting a supplier. In
this case, you meet with each supplier
c) Trade shows/exhibitions - Attend trade individually to negotiate terms.
shows and exhibitions where suppliers
display their wares. Meet with prospective b) Request proposals - Require suppliers
suppliers to discuss your needs. to submit written proposals detailing their
capabilities and costs.
d) Referrals - Ask people you trust for
recommendations. They may be able to c) Pre-qualification - Require suppliers to
introduce you to someone else who can demonstrate their ability to perform before
assist you. you commit to them. Typically suppliers
are required to complete a pre-qualification
e) Research - Conduct research on potential questionnaire, which in some instances
suppliers by reading reviews and might be followed by an onsite audit by the
testimonials posted online. buyer organization.
f) Networking - Make contact with other d) Request for quotation (RFQ) - Require
companies in similar industries to see if suppliers to quote prices for a given set of
they would recommend a particular requirements. In addition, the supplier
company. would be asked to provide details related to
capability, capacity, third party
g) Directories - Look at the trade
certifications etc., as evidence of their
directories available to find out if there are
ability to provide that product.
any suppliers in your area.
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Finally, selected suppliers are then 3. Consider the benefits - Think about the
included in the approved supplier list of the advantages and disadvantages of working
organization. with each supplier. Do they provide good
customer support? Will they deliver
6. Monitor Performance quickly? Can they handle special requests?
Monitoring performance is essential 4. Use technology - Technology has made

throughout the entire supplier selection it easier than ever to find and contact
process. Monitoring ensures that you're potential suppliers. There are plenty of
getting what you paid for and that you're online tools available to assist you with
receiving the highest level of service your research.
possible.
5. Be realistic - Don't expect to find
SELECTION OF GOOD SUPPLIER everything you need from one supplier.
You'll probably need to combine different
For selecting a good supplier, there types of products and/or services from
are so many factors to consider. You have various sources.
to look at their performance history, their
customer service record, price, delivery and 6. Ask for references - Check out previous
more. clients' experiences with the supplier. It's
also worth asking if they can recommend
other suppliers who may offer better
benefits at lower price points.
Here are some tips on how to select
a good supplier: SUPPLIER EVALUATION:
1. Plan ahead - Before starting your Supplier evaluation is the process

supplier selection process, take the time to organizations use when choosing vendors
think about where you want to go and what and suppliers for their products or
you want to achieve. What do you hope to materials. During this process, a company
accomplish? Do you want to select a single might evaluate certain criteria to determine
supplier or multiple ones? How many which vendor can best help it achieve its
suppliers will you require? Will you use a business goals. Here are several criteria you
formalized process or rely on intuition? might use to evaluate a supplier, including:
These questions will help guide you
through the rest of the process. Price: Suppliers offer various price ranges
for the same products. Monitoring prices
2. Look beyond price - When evaluating frequently helps you identify changes in
suppliers, don't just focus on cost alone. market demands or availability.
Take into account the type of services
offered, the quality of the products, the Quality: Product quality provides a
delivery timescale, and the availability of qualitative measurement of how durable or
spare parts. effective a supplier's product is. You might
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request samples to evaluate quantity before Scorecards: You might create scorecards
purchasing. with a numerical rating system for each
evaluation criterion. This provides
Service: Consider evaluating the service a measurable data about each vendor so you
supplier provides before working with can compare suppliers.
them. Service criteria might involve
friendliness, responsiveness and an overall Questionnaires: Questionnaires can
understanding of the company's needs. provide more qualitative data, like quality
and communication effectiveness. You
Social responsibility: Companies may might also provide questions to suppliers to
value suppliers whose values and mission explain some of their processes.
align with their own. Social responsibility
can include a supplier's community Discussions: Informal discussions allow
involvement and contributions to charities. leadership and teams familiar with products
to discuss their options. As each team
Convenience: For companies in need of member might have different priorities, like
frequent supplies, convenience matters. cost or convenience, discussions can help
You might evaluate how easy it is to order everyone decide on the most important
products, how quickly you receive supplies factors when selecting a supplier.
and how willing a supplier accommodates
your employer's needs. Vendor visits: Some businesses meet with
a supplier at their location to learn more
Flexibility: Flexibility shows a supplier's about the company and its production
ability to scale deliveries up and down methods. This lets you get acquainted with
based on business needs. This can be an key staff members and make notes about
important criterion if productivity the supplier environment.
fluctuates throughout the year or if several
locations require deliveries. HOW TO EVALUATE A SUPPLIER
Risk: As many businesses rely on their There are several steps you can take
suppliers to provide their own customers' to evaluate a supplier:
products, understanding the risk can help
you determine if they're the right supplier. 1. Define your metrics
You might analyze the risk of price
increases or supply availability. Before evaluating suppliers, define
your metrics based on the most important
TYPES OF SUPPLIER criteria for the business. Some metrics you
EVALUATIONS: might track include the number of on-time
deliveries, average price or number of
Using several methods for assessing product defects received. Each of these
a vendor can provide valuable insight for performance indicators can help you
making business decisions. Here are several compare different suppliers. To understand
methods you might use to perform a how receptive they might be to changing
supplier evaluation: business needs, you can also consider other
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metrics, like if vendors have available better service and products to ensure you
feedback channels and existing customer meet business needs. In these vendor
reviews. discussions, you might share what criteria
they've met and what they might improve to
2. Identify potential vendors continue earning your employer's business.
Once you collect metrics, you can BENEFITS OF SUPPLIER

list the different types of vendors your EVALUATION:
employer might need. These include
delivery, manufacturers, office supply Several key benefits of
providers or raw material suppliers. implementing a supplier evaluation include
Categorizing each based on priority can the following:
help you identify which vendor might be
most important to the business's success. Understanding business needs
These classifications can show you how
strictly you might evaluate each. Evaluating potential suppliers
allows you to review business needs. This
3. Create an evaluation process can involve understanding what materials
your product needs, how frequently you
Defining a clear evaluation process need to order products and if production
can help you select a supplier and monitor varies throughout the year. By
their performance. Consider which team understanding and evaluating your
members can offer input to rate each employer's needs, you can identify the most
criterion. These may include sales important criteria for the company's
associates, members of supply chain teams success.
or quality assurance team members who
can rate the quality and consistency of each Defining performance indicators
supplier.
Reviewing several supplier criteria
Once you develop an evaluation allows you to define key performance
team, determine the most effective method indicators (KPIs) to compare your options.
to assess vendors. Consider establishing These indicators can help you identify how
regular meetings with internal teams to well a vendor's performance matches your
evaluate the supplier and discuss their expectations and standards. Sharing KPIs
findings with leadership before can also help hold vendors accountable for
communicating results to the vendor. areas where they can improve their
performance.
4. Communicate with vendors
Improving vendor relationships
Similar to regular team meetings,
you might also establish monthly or Supplier evaluations act as useful
quarterly meetings with vendors to evaluate tools to improve vendor relationships by
their performance. Working with vendors clearly communicating the company's
as partners can encourage them to provide needs and expectations. Initial evaluations
allow you to learn about a company, its
14
representatives and important details like supplier’s ability to meet the customer’s
price and availability. Continuous needs. SQM measures supply chain
evaluations allow you to arrange regular performance using a proactive and
meetings to discuss performance and collaborative approach.
develop open communication channels.
To master supplier quality
Identifying risks management, companies have to hit a few
targets. First, you need to foster positive
Companies face different risks from relationships with suppliers throughout
each vendor and identifying these can help your whole supply chain. Next, you need to
you plan contingencies. For example, one develop an organized supplier quality
vendor might offer fluctuating prices, management procedure with easy-to-track
which can cause the company to exceed a metrics for success regarding quality and
budget when purchasing. When evaluating compliance. Once you’ve nailed your
each supplier, you might assign risks to metrics and procedure, it’s time to start
each. With this information, you can tracking the data to dig up supplier insights.
determine which risks could have a greater The trends you find in these insights will
impact on the business or the likelihood an help you understand how well suppliers are
issue might occur. Identifying these risks meeting the needs of your customers across
before purchasing can help you determine a your whole supply chain.
mitigation plan to minimize the effects on
business operations and profits. Relationships with suppliers play a
bigger role in supplier quality management
Encouraging better performance than you might think. To establish an
effective supplier management process,
With supplier evaluation, you need strong trust, as well as the ability
companies often communicate their to exchange expertise and resources across
findings with their vendors. This helps each expansive supply chains. Working together
supplier understand how they might also requires both parties to understand
improve to earn your employer's business their role in the process.
for future needs. For example, you may
note that one supplier has the best prices
and quality, but you require more flexibility BEST PRACTICES IN SUPPLIER
and convenience when ordering throughout QUALITY MANAGEMENT:
the year. The supplier may then investigate
ways to improve your experience and Supplier quality management
increase delivery resources to meet your (SQM) is a critical activity for any business
employer's needs. that relies on suppliers in the provision of
their goods or services. It involves
SUPPLIER QUALITY managing, monitoring and responding to
MANAGEMENT: changes in the supplier's ability to fulfil
customer's needs on time and to the agreed
Supplier quality management quality specification. Key practices for
(SQM) is the process of monitoring a managing supplier quality are
15
Measure the cost of quality Instead of separate financial, quality

and operational systems, an integrated
Find out how much it costs to enterprise solution can enable
manufacture a quality product. Then look at communication, collaboration and quality
how much poor quality costs - for example, control across the supply chain from
scrap, rework, sorting and processing, procurement to delivery.
warranty and recall costs.
MONITORING SUPPLIER'S
Introduce a cost recovery system PERFORMANCE:
Agreeing a cost recovery process In monitoring the performance of

can boost accountability throughout the suppliers, it often helps to keep track of
supply chain. It may allow you to recover critical metrics and KPIs, such as the
the cost of poor quality from a supplier, and percentage of:
encourage them to look at and address
issues causing poor quality quickly and  returned products
efficiently.  products delivered on time and
complete
Audit your supplier  products in compliance with
regulations or quality standards
Agree a procedure to quality check  new products introduced in the
your supplier against non-conformances in market that met time, volume, and
manufacturing, quality, service provision, quality targets
compliance etc. Audits can identify areas
for improvement and help you agree Other supplier performance metrics
corrective actions, response and resolution may include: order fill rate, lead-time
processes and targets, etc. variance, received vs ordered units, ordered
price vs invoiced price, accuracy of
Introduce supplier scorecards advanced shipment notifications, etc. Find
more tips to help you review your suppliers'
Standardised scorecards may give performance.
you a way to rate suppliers on performance
and benchmark one supplier against SUPPLIER QUALITY ASSURANCE
another. Scorecards can measure supplier's AND CERTIFICATION:
key performance indicators (KPIs), non-
conformance or risks. They can help you Some suppliers may have a quality-
track improvements or failures in quality related accreditation, such as the ISO
over time and identify areas for certification. This is a globally recognised
improvement, as well as agree corrective mark of quality excellence, which declares
actions to minimise quality risks in the that the supplier:
future.
 is operating to verifiable standards
Integrate IT processes  has a solid quality management
system in place
16
Choosing quality-certified suppliers evaluating the suppliers based on a set of

offers you the reassurance that they have criteria and selecting the ones that best meet
the right processes in place to provide you the company’s needs. This could include
with consistent, reliable, quality service. things like financial stability, past
See more on quality management standards performance, and compliance with industry
and choosing the right suppliers. standards.
IMPORTANCE OF SUPPLIER After a supplier is selected, the

QUALITY MANAGEMENT company will work to establish a strong
relationship with them. This could involve
Managing your supplier quality can regular communication, setting clear
bring many benefits to your business. It can expectations, and working together to
increase your product quality, boost your resolve any issues that may arise.
bottom line and enhance your business'
reputation. On the other hand, poor supplier The company will also work to
quality can lead to lost sales, costly recalls, continuously improve the relationship over
penalties for non-conformance or legal time. This could include working with
action. suppliers to develop new products or
services, improving delivery times or
SUPPLIER MANAGEMENT AND quality, and identifying new cost savings
DEVELOPMENT opportunities.
Supplier management and In addition, the company will also

development is the process of overseeing monitor the supplier’s performance and
and working with the suppliers that provide take corrective actions if necessary. This
goods and services to a company. This could include terminating the relationship if
includes identifying, selecting, and the supplier is consistently
evaluating suppliers, as well as developing underperforming or not meeting the
and maintaining strong relationships with company’s requirements.
them.
Overall, supplier management and
The first step in supplier development is a continuous process that
management is identifying the suppliers involves identifying, selecting, and
that a company needs to work with. This working with suppliers to ensure that the
involves determining what goods and company has the goods and services it
services are required, and researching needs to operate effectively and efficiently.
potential suppliers to find the best fit for the The company needs to maintain strong
company’s needs. This could include relationships with suppliers, continuously
factors like cost, quality, and delivery monitor their performance and work
times. together to improve their collaboration.
Once potential suppliers have been SUPPLIER MANAGEMENT?

identified, the company will begin the
selection process. This typically involves
17
Supplier management refers to all 1. Increasing Operational Scale that results

the business processes and activities that in increasing need for local as well as global
deal with the entire lifecycle of a supplier suppliers
for an organization.
2. The Increasing Complexity of Supply
This includes but is not limited to, Chains which also result in a rising depth of
identification, selection, and management the organization’s supplier base
of relevant suppliers coupled with a
practical evaluation of their performance to 3. Growing Risks in a Supply Chain which
ensure they are providing maximum value can make the organizations more
for the organization’s third-party vulnerable to performance failure if their
requirements. involved suppliers are not managed and
evaluated effectively
THE IMPORTANCE OF SUPPLIER
MANAGEMENT 4. Managing Supplier Data that allows
organizations to streamline crucial supplier
When it comes to establishing why data to provide meaningful insights for
businesses necessitate supplier improving supplier management
management, there are two main pillars we
need to recognize: 5. Establishing Long-term Supplier
Relationships that will enable suppliers and
1. To evaluate if the suppliers are organizations to meaningfully collaborate
performing as per the organizational and create synergies for maximized
requirements performance for the long run
2. To identify areas of improvement while
engaging with suppliers throughout 6. Leveraging supplier relationships in
their lifecycle times of organisational or external distress
to ensure business performance doesn’t
These two factors primarily fluctuate
highlight why we need it to ensure we are
deriving the maximum value from the 7. Increasing Competition implies
suppliers for the relevant requirement(s), organizations have to identify and improve
given the resources invested in the aspects of their business processes that can
suppliers. To get the most out of a provide them with a competitive advantage
supplier’s service, it is important to track
and measure their performance. With 8. Matching Industrial Standards of
regular communication and feedback, an supplier performance so that organizations
organization develops a transparent can achieve best-in-class performance
relationship with the supplier, which helps
in finding areas of improvement with quick KEY FEATURES OF SUPPLIER
solutions. MANAGEMENT:
KEY FACTORS DRIVING SUPPLIER Some key features of a robust

MANAGEMENT: supplier management capability are:
18
1. Supplier Collaboration –Ongoing advantage by empowering enterprises to

communication and integration between react swiftly to market dynamics and risks.
buyers and suppliers to jointly enhance
value. Tight collaboration develops BENEFITS OF SUPPLIER
strategic relationships. MANAGEMENT:
2. Supplier Onboarding –Structured Now that we understand why need

processes for identifying and validating the supplier management, let’s look at how it
right suppliers, getting them can benefit organizations:
interconnected, and activating procurement
systems. 1. Managing a Growing Supplier
Base Effectively
3. Supplier Relationship Management –
Nurturing win-win partnerships with The supplier base of organizations
suppliers by assessing performance and is increasing – this is a consequence of a
contribution. Developing engagement myriad of factors like increasingly
strategies aligned to supplier value. globalized business processes that provide
access to global suppliers, increasing the
complexity of supply chains, increase in the
scale of operations of organizations, etc.
4. Supplier Lifecycle Management– End- Due to the increase in the number of
to-end approach spanning supplier suppliers engaged with the organizations,
selection, onboarding, performance managing the entire lifecycle of suppliers
management, and offboarding. Maximizes becomes difficult. Having a well-structured
supplier value across tenures. supplier management process in place will
allow organizations to manage their
5. Supplier Information Management – multitude of suppliers with ease.
Consolidating supplier data across systems
provides a unified view of relationships for 2. Achieving Cost Savings and
insights. Enables real-time decisions. Quality Control
6. Centralized Supplier Portals –Digital Having strong supplier

hubs for suppliers to access procurement management practices will enable
systems, submit documentation, track organizations to identify cost savings
interactions, collaborate on goals, etc. opportunities in the supply chain and
scrutinize the quality of supplier output.
7. Analytics for Supplier Insights –Data- This directly impacts and contributes to the
driven insights using SPM metrics on risks, company’s bottom line.
performance, pricing, help make strategic
sourcing decisions. 3. Improving the Organization’s
Supply Transparency
Effective supplier management
needs the right processes, technology, and When you have a supplier
culture of collaboration to maximize supply management system in place, it will allow
network value. It delivers a competitive you to streamline valuable information and
19
data regarding the lifecycle of the suppliers. long-term crucial requirements and help
It enables the organizations to have improve their performance.
increased transparency into the number and
type of engaged suppliers and how they are 7. Leveraging Supplier
performing and helps in identifying areas of Relationship Management
improvement and design strategies to
improve their performance further. It might not seem so, but the
relationships you build with your suppliers
4. Tracking Compliance to can be very beneficial for your
Relevant Parameters organization. When you collaborate with
your suppliers and involve them in the
Every supplier has to fulfill specific process of deciding how to achieve the
set parameters to ensure they are fulfilling relevant requirements, you build long-
the requirements of the organization. Using lasting, trust-based relations that can be
a supplier management system, you can leveraged in the future. Collaborating with
evaluate the suppliers’ compliance with the suppliers makes them more willing to
set parameters and identify the scope of understand your business needs and
improvement to derive maximum value. consider strategies on the organization’s
terms.
5. Evaluating Supplier
Performance 8. Assessing and Mitigating
Supplier Risk
This is possibly one of the essential
benefits of having supplier management. Identifying and mitigating supplier
You need to know how your suppliers are risk is another unequivocally critical
performing because your organization’s benefit of having efficient supplier
performance is mostly dependent on them. management for your organization. As
Not only will supplier performance supply chains and the resultant supplier
management allow you to evaluate supplier relations becomes complex, the probability
compliance, but it will also give you in- of detrimental supplier risks also increase.
depth insights on their performance. It Supplier management helps in identifying
includes the creation of various KPIs to and assessing the impact of the supplier
measure supplier performance, and using risks and devising appropriate risk
these; you can assess the value created by mitigation measures.
the suppliers.
9. Building a Supplier
6. Building Development Management Process
Programs to Support Suppliers
Now that we have identified the
Once you have evaluated suppliers need and benefits of supplier management,
and identified areas for improvement, it is necessary to establish a process. The
supplier management can help you design process will guide an organization about the
development programs to support strategies it has to employ to manage the
suppliers, especially the one that caters to entire lifecycle of the engaged suppliers.
20
SUPPLIER MANAGEMENT criteria you have identified. Majority of the

PROCESS organizations evaluate the suppliers based
on the pricing they have quoted. However,
1. Identifying the Set of Business it is equally important to factor in the other
Goals and Objectives criteria that you have identified.
Before you get on-board with your Assess the quotations and proposals
supplier management process, it is given by the potential suppliers and ensure
important to identify the set of business you are deriving maximum cost savings
goals and objectives for which suppliers are opportunities. Analyze the terms and
required. It will highlight what every conditions to see how well the suppliers are
department requires from third-parties so planning to meet the organizational
that you can map the relevant suppliers to requirements. At the same time, make sure
every need without duplicating efforts and you have done a thorough, holistic analysis
resources. These objectives will also help of the suppliers’ strengths and weakness
evaluate supplier performance vis-à-vis the and study how the external environment’s
objectives that were communicated to threats and opportunities can impact your
them. engagement with the suppliers.
2. Identifying Relevant Selection 4. Negotiating and Contracting

Criteria for Choosing Suppliers with the Selected Supplier(s)
Once you know the objectives and Now that you have chosen the
requirements that necessitate supplier relevant suppliers, you need to execute the
engagement, you need to define the contracting process to get them onboard
selection criteria for choosing suppliers that finally. Ensure that you involve all relevant
will provide maximum value for the stakeholders in the contracting process to
requirement. gain valuable insights on how the contract
can ensure maximum delivery of value. In
While the selection criteria depend a lot of business cases, the contracting
on the type of the organization and its process is executed by the finance
requirements from suppliers, standard procurement team with the senior
measures include pricing, quality of past executives of business units whereas the
work, industrial recognitions, legal groups that will work with the suppliers on
reputation, etc. Organizations also engage a day-to-day basis are not consulted.
in RFQs, RFPs, and RFIs for selecting
relevant suppliers, especially when the Collaborate with the suppliers to
requirements are significant. ensure that the negotiation process runs
smoothly with minimal roadblocks. We
3. Evaluating and Selecting have already established the benefits of
Suppliers meaningful relationship-building with
suppliers.
The next step is to evaluate all
relevant suppliers based on the selection
21
5. Evaluating Supplier performance. In today’s competitive

Performance business environment, effective supplier
management tools are necessary for
The supplier management process maintaining a resilient and responsive
doesn’t just end once you choose the supply chain.
suppliers. After their selection and
onboarding, you need to periodically CREATING A WORLD-CLASS
evaluate their performance to see how well SUPPLY BASE:
they are fulfilling the set objectives and
requirements. To ensure practical Your supply chain turns raw
evaluation, make sure you have established materials into finished products that meet
KPIs to measure performance. This will customer expectations. It takes a whole
also provide insights into areas for network of people, from suppliers and
improvement to maximize supplier manufacturers to distributors and partners,
performance. It also tells us how effective working together to produce the best
our supplier management process is and quality products on the market. But how is
how it can optimize it further. it possible to build a “world class” supply
chain?
SUPPLIER MANAGEMENT TOOLS
AND THEIR IMPORTANCE According to Harvard Business
Review, recent events such as the Covid-19
Supplier management tools are pandemic have exposed supply chain
software solutions designed to streamline vulnerabilities and prompted a reevaluation
and enhance an organization’s interactions of global approaches to improve resilience.
with its suppliers. They play a crucial role Fortunately, the idea of a supply chain
in efficiently managing supplier being world-class goes hand in hand with
relationships, ensuring product quality, and world class manufacturing, and there is a
maintaining a reliable supply chain. set of guiding principles to follow.
Following them will help you successfully
Some common types of supplier operate and manage a manufacturing firm
management software include: that can remain competitive in the global
marketplace.
1. End-to-End Supplier Management
Portals STEPS FOR MAKING YOUR SUPPLY
2. Supplier Information Management CHAIN WORLD CLASS:
3. Supplier Performance and Risk
Management Step 1: Define clear objectives
Supplier management tools are Step 2: Gather necessary data

essential for organizations seeking to
streamline their supplier management Step 3: Choose a supply chain management
processes. They enhance efficiency, reduce system
risks, and enable better decision-making by
providing valuable insights into supplier Step 4: Conduct supply chain network
analysis
22
Step 5: Refine and improve unique business model. Adopt advanced

supply chain management systems (SCM),
Making your supply chain world enterprise resource planning (ERP)
class is about meeting or even exceeding software, connected worker software, and
customer expectations and delivering top- warehouse management systems (WMS).
notch performance every time. Explore emerging technologies like
blockchain, AI, and robotics to further
Step 1: Define clear objectives optimize operations.
Start by identifying overarching Step 4: Conduct supply chain network

goals that will create consumer satisfaction. analysis
To help define those goals, ask yourself the
following questions: Once you’ve picked the perfect
supply chain software, it’s time to analyze
 How much inventory needs to be how well your production processes are
stored, and where should it be? faring. Consider evaluating if there are any
 Which modes of transportation would gaps in product development and how long
best balance out cost versus customer it takes for goods to be delivered.
service objectives?
 Which warehouses should administer Step 5: Refine and continually improve
which products to people?
 How many warehouses are needed and Carefully examining your supply
what is the role of each? chain network and processes is a great
 What are the best routes to get products starting point for becoming world class. But
to customers the fastest? if you don’t make steady strides toward
improvement, you’re left at a standstill.
Step 2: Gather necessary data Things are constantly evolving in the
manufacturing industry, so it’s helpful to
It’s important to gather the check some of the following: production
appropriate data to ensure that you’re capacity, price fluctuations in raw
meeting company-specific goals. For materials, and any new large customer
example, you may track data so you can orders (especially if they were added in a
keep an eye on product demand, different location).
transportation rates, lead times, and
warehouse and inventory expenses. Encourage a culture of learning,
innovation, and continuous improvement
Step 3: Embrace technology and within the organization. Promote employee
digitalization engagement, provide training and
development opportunities, and empower
Leverage technology to automate employees to contribute ideas for process
manual tasks, improve visibility, and optimization and supply chain innovation.
enhance decision-making. It’s crucial to
pick software that addresses all of your
production criteria and facilitates your
23
Continuous improvement is a must. There are five levels of global

So revisit your processes regularly, whether sourcing, including:
that’s monthly, quarterly, or annually.
Level 1: Domestic purchases only
GLOBAL SOURCING
Level 2: International purchases
Global sourcing refers to a made on an as-needed basis
procurement strategy that a business uses to
find the most cost-effective location for Level 3: Sourcing strategy that
manufacturing one or more of its products. includes global purchasing
For instance, if a toy manufacturer
discovers that it is more cost-efficient to Level 4: Centrally-coordinated
have its products manufactured in a foreign purchasing across global locations
country because of the lower wages of
employees in that country, it may shut Level 5: Global coordination and
down its factory and outsource its integration with other functional groups
manufacturing to a foreign manufacturer
If you know where your company
instead. Global sourcing involves more
stands within these levels, you will have the
than just searching for products globally. It
opportunity to maximize your business's
is also an effort to improve certain aspects
long-term performance. This information
of manufacturing, such as:
enables you to make informed decisions to
take your organization's performance to
 Supplier selection and performance
another level.
 Speed to market
 Estimation of product costs
MANAGING GLOBAL SUPPLIER
 Trade compliance RELATIONSHIPS
 Auditing
After successfully identifying
Global sourcing may also refer to suppliers, selecting the most suitable
acquiring components or raw materials that partner, and finalizing the contract, the
go into products from other countries, not management of global supplier
just the country where the company is relationships becomes an ongoing process.
headquartered. For instance, Starbucks Effective supplier relationship management
purchases its coffee from places such as (SRM) is essential to ensure the smooth
Colombia and Guatemala. The main execution of global sourcing initiatives.
advantages of global sourcing are lower
cost and higher quality. It offers many Key aspects of managing global
possibilities for companies, from supplier relationships include:
purchasing the finest cocoa beans for
producing chocolate to buying high-quality Communication: Maintaining open
yet low-cost aluminum from Iceland. and transparent communication channels
with suppliers to address issues, changes,
LEVELS OF GLOBAL SOURCING and opportunities.
24
Performance Monitoring:
Continuously monitoring supplier
performance to ensure adherence to
contract terms and quality standards.
Risk Management: Identifying

and mitigating potential risks in the supply
chain, such as supply disruptions or
geopolitical factors.
Collaboration: Collaborating with

suppliers on innovation, process
improvement, and cost optimization
initiatives.
Conflict Resolution: Resolving

conflicts or disputes that may arise during
the course of the sourcing relationship.
Effective supplier relationship

management fosters long-term partnerships
that benefit both parties. It enables
businesses to adapt to changing market
conditions, drive innovation, and maintain
a competitive edge.
RISKS OF GLOBAL SOURCING
When taking risks into

consideration, you need to identify the
obstacles that can hinder progress toward
efficient integration with an offshore
supplier. In a foreign country, such
obstacles may include the lack of
government support, unorthodox laws, and
cultural differences. In addition, you should
exercise extra caution when you are
searching for manufacturers that offer low
prices.
25

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RVS Institute of Management Studies

BA4052 SOURCING AND SUPPLY organization. Also known as procurement,

information to keep the business running production, and distribution of products,

The main goals within supply Supply chain management requires

Managing resources and suppliers Procurement is an ongoing business

Companies with well-coordinated 2. Submit purchase requisition

-Coffee beans employed, and the best strategy for any

Commodity strategies are created in 1) Momentum-based strategies: These

important thing is that the information is chain, such as assembler, manufacturer, or

STEP 1: SPEND ANALYSIS STEP 3: IDENTIFYING AND

STEP 5: CONFIRM THE savings. The tasks need to reflect activities,

Once the supply or service cost PROS AND CONS OF A

Quantify potential savings to ensure Before diving into a commodity

Supplier selection is the process of finding SUPPLIER SELECTION PROCESS:

WHAT MAKES A GOOD SUPPLIER? For example, suppose you're

Responsiveness - 10% 4. Make a Short List of Suppliers

Capability - 10% Now that you've identified potential

Monitoring performance is essential 4. Use technology - Technology has made

1. Plan ahead - Before starting your Supplier evaluation is the process

Once you collect metrics, you can BENEFITS OF SUPPLIER

Measure the cost of quality Instead of separate financial, quality

Agreeing a cost recovery process In monitoring the performance of

Choosing quality-certified suppliers evaluating the suppliers based on a set of

IMPORTANCE OF SUPPLIER After a supplier is selected, the

Supplier management and In addition, the company will also

Once potential suppliers have been SUPPLIER MANAGEMENT?

Supplier management refers to all 1. Increasing Operational Scale that results

KEY FACTORS DRIVING SUPPLIER Some key features of a robust

1. Supplier Collaboration –Ongoing advantage by empowering enterprises to

2. Supplier Onboarding –Structured Now that we understand why need

6. Centralized Supplier Portals –Digital Having strong supplier

SUPPLIER MANAGEMENT criteria you have identified. Majority of the

2. Identifying Relevant Selection 4. Negotiating and Contracting

5. Evaluating Supplier performance. In today’s competitive

Supplier management tools are Step 2: Gather necessary data

Step 5: Refine and improve unique business model. Adopt advanced

Start by identifying overarching Step 4: Conduct supply chain network

Continuous improvement is a must. There are five levels of global

Risk Management: Identifying

Collaboration: Collaborating with

Conflict Resolution: Resolving

Effective supplier relationship

RISKS OF GLOBAL SOURCING

When taking risks into

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