Is supplier management the missing link between strategic and tactical procurement? Spend Matters UK/Europe Editor Peter Smith thinks so. In his recent analysis, Putting the Supplier at the Heart of Procurement Thinking, Peter observes that “for procurement to develop and build on a supplier focus, there must be both the right mental attitude and hard data, processes and systems.” Which brings up the topic of linking transactional and strategic procurement activities.
Peter crisply defines these two functional components by suggesting “the transactional or purchase to pay (P2P) cycle considers the process through requisitioning, ordering, delivery, receipt, payment and recording. The sourcing cycle relates to developing requirements, approaching the market, supplier selection, contracting, contract and supplier management.”
Where does the supplier fit into all of this? Right in the middle, that’s where. As Peter observes:
“The supplier-centric focus and process however sits across both of those cycles, arguably a sign of why this is such a useful and powerful approach. The supplier is central to both the transactional and the strategic sourcing processes.”
“So the start of the relationship with the supplier comes when they either start doing business with the organisation, or express an interest in doing so, perhaps by applying to be on an approved supplier list or expressing interest in a particular competitive process like a tender. At this point, relevant information about the supplier needs to be obtained a process generally known as onboarding.”
Verification of information can be as important as basic collection. Moreover, information changes—sometimes on a linear basis, sometimes radically. In the case of supply risk, it’s the time of punctuated equilibrium (i.e., greatly accelerated change), where eternal vigilance is the true price of procurement and supplier management liberty. To wit:
“[Today] the information collected often relates to the area of supplier and supply chain risk. As well as the more operational risks around supplier stability, supply interruption and so on, information now is often related to corporate social responsibility in its widest sense. This has grown in importance greatly in recent years, and the scope of what is often needed in terms of data and information can now be extensive.”
Download the full paper, Putting the Supplier at the Heart of Procurement Thinking, in the Spend Matters free research library.