Supplier Lifecycle Management – the benefits

We launched our new research paper last week - Supplier Lifecycle Management: Reduce risk, Improve Performance and drive Supplier Value”. In it, we look at the concept of Supplier Lifecycle Management, (SLM), which works from the premise that the supplier should be considered as central to procurement activities and processes. Here and here are our two previous posts about the paper, and today we’ll complete our coverage of it by looking at the benefits you can achieve by taking this approach.

The benefits are explained under four headings in the paper.

Process cost reduction - greater efficiency for procurement staff, users and suppliers; better planning and lower process costs. For example, collecting and managing supplier information is surprisingly costly and time-consuming, and over the life of a relationship with a supplier, far too much time and effort – largely unproductive at that – is spent in communications of an administrative nature.

Risk reduction -the importance of supply chain and supplier risk management has become increasingly appreciated over the last few years. SLM provides the basis for proper understanding of suppliers and the risks they present by obtaining, managing and updating the information required for thorough risk management. Risk events can lead to supply interruption or additional costs; but more serious are those that cause damage to the reputation of the brand or the whole business. Identifying weaknesses at individual supplier and supply chain level needs robust and up to date information with tracking of supplier accreditations, capabilities and performance through the contractual period. This all helps to manage, reduce or mitigate the inevitable risk inherent in every organisation’s supply chain.

Value gains from suppliers -managing suppliers well across the whole lifecycle is a pre-requisite for achieving value gains, taking cost out of the supply chain and ultimately achieving the best possible value in whatever is being procured. But it all relies on the accuracy and completeness of the underpinning supplier data, and a clear view of the supplier, their contracts and the importance of their business with the organisation.

Innovation and “soft” gains from suppliers - whilst the hard value gains are vital to the success of the procurement function and the organisation, it is often innovation gains provided by suppliers that ultimately outweigh pure cost savings. Too often suppliers are invited to participate in a “strategic relationship management” programme on the basis of size of spend, with little reference to their measured performance, the prospects for future business with them, or thought about any additional value that could be obtained from the programme.  The ability to consider the entire end-to-end view of the supplier and their relationship with the whole organisation, will lead to better decisions and give a greater chance of capturing the supplier innovation that can deliver real competitive advantage.

Finally, here is our conclusion from the paper.

Supplier Lifecycle Management is a new way of looking at the fundamental procurement function. By defining the supplier as the common and central factor in both the transactional purchase to pay process and the strategic sourcing process, SLM brings together and makes sense of traditional ways of looking at procurement cycles.

SLM considers all the elements of our relationship with a supplier, from initial engagement and information gathering, risk management, the sourcing process, through the working relationship, to development and on towards final parting of the ways. This holistic approach brings significant benefits through a clear, single view of the supplier and the business with them – benefits that range from greater value delivered by our supply base, internal efficiency gains, to improved risk management.

We do hope you’ll download it here and read the whole document.

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