Scary Situations for Procurement Professionals

Scary Situations for Procurement Professionals

From jumbo pumpkins for jack-o-lanterns to spooky costumes and decors, procurement departments prepare well in advance to support Halloween stock. However, going overboard with seasonal products can strain procurement teams, cost organizations big amounts and ultimately fail to get a return if the product fails. That’s the scary story of procurement.   And it does end with Halloween… Thanksgiving, White Friday, Christmas, and more to follow.   As these holiday seasons grow in popularity, procurement professionals are often caught amidst difficult situations with some tough decision-making, especially when it comes to sourcing suppliers, negotiating and managing supplier relationships. There is no denying that navigating the complexities of supplier relationship management can be challenging, even for highly experienced procurement professionals.

Supplier Relationship Management

CIPS defines supplier relationship management as “a comprehensive approach to procurement, managing and capturing the post-contract value from key business relationships”. SRM is a long-term approach that necessitates meticulous planning, open channels of communication, and strong governance.  It involves activities like supplier selection, contract negotiation, performance management, and risk mitigation. Supplier management is the most crucial task for any procurement organization. Any company that wishes to provide quality services and secure “win-win” results must have a simplified and effective supplier evaluation and management process in place.

Beware of these Supplier Relationship Management Mistakes

Any procurement method requires effective supplier relationship management. Therefore, procurement professionals need to avoid supplier relationship complacency. Here’s some common pitfalls to avoid setbacks and obtain better results.

Relying on a single supplier

Over-reliance on a single supplier is dangerous. While having a close association with one supplier may appear to be advantageous, but if this one supplier encounters issues, it can expose the organization to supply chain disruptions or price inflations.

Not setting clear expectations

The next stumbling block is failing to establish clear expectations from the very beginning. Misunderstandings can occur if roles and duties are not clearly defined, resulting in delays and missing deadlines.

Not communicating regularly

Failing to communicate with suppliers on a regular basis can result in serious blockades. As a result, chances for improvement and efficiency could be lost, thus hampering product quality or delivery timeframes.

Not monitoring supplier performance regularly

Another pitfall is failing to check supplier performance on a regular basis. Regular evaluations verify that suppliers are achieving agreed-upon criteria and offer insight into areas where their processes and techniques could be enhanced.

SRM – Best Practices

Every day could be a Halloween for procurement teams if the entire process and procedures of supplier or vendor management are not managed efficiently. Make sure that your organization follows these practices to produce better outcomes.

Effective two-way communication

Try to understand your suppliers’ needs and at the same time ensure that you express your expectations and requirements clearly. You should also be able to discuss performance management issues with them to bring in any kind of improvement.

Collaborate to improve KPIs

Procurement teams who successfully coordinate with their main suppliers are also successful in increasing their suppliers' capabilities in terms of innovation, quality and dependability while also delivering cost reductions. Work to set an internal process to lock in supplier ideas for efficiency and innovations and get them approved and endorsed by your senior management.  Collaborate with suppliers to agree on KPIs as well.

Robust governance in SRM

In the presence of robust governance in terms of negotiation, contract, performance and risks, suppliers are well aware of what is expected of them. Make sure a mutually agreed governance framework is in action when it comes to identifying and mitigating risks.

Sealing skills gaps of people

People managing the supplier relationship management must possess the right skills and if there are any gaps, those must be sealed. Companies must invest in technical skills education like CIPP, CIPM, and CIPS for employees to enable them to strategically achieve procurement excellence.   Remember procurement excellence is an ongoing effort that requires continuous monitoring and adaptation and SRM lies at the center of it. As discussed, follow these best practices, avoid the traps, and let there be no tricks, only treats!  
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