Are Fragmented Supplier Management Practices Within Suppliers Increasing Risk?

In a previous post, Assessing Extended Supply Chain Risk Exposure – Questions to Ask Suppliers About Their Supplier Management Practices, I highlighted a number of questions that organizations can ask their tier-one suppliers to gauge and assess overall extended supply chain risk. Some of these were based on an article in Sourcing Journal Online, written by Bryan Nella of GT Nexus. In the same article, Bryan hits the nail on the head when he addresses an even more fundamental issue that creates supply risk – supplier management is a part-time job for many individuals within a typical vendor base.

As he writes:

Quite often, multiple departments … deal with different aspects of the supplier. Sourcing negotiates the price, logistics determines how to ship, supply chain tracks the shipment and finance determines when to pay. Each internal department has a different goal, which can lead to heavy strains on a supplier. Picture a supplier getting squeezed on cost, while being held to stringent quality and delivery standards, while late order amendments come in, and while having payment terms extended. This fragmented approach to supplier management leads to the haphazard reliability of supply. The status of each process is tracked separately and there is no way to look at the big picture.”

One of the ways that procurement organizations can overcome the challenge of decentralized and haphazard supplier management practices within their supply base is to provide a set of tools that suppliers can use to manage vendor information and collaboration that “roll up” across various supply tiers and categories. Yet technology alone is not enough – teaching and explaining what best-in-class supplier management is and why it matters (for their own bottom line) should be a fundamental part of all supplier development programs.

As Bryan notes, “partnering with suppliers to provide them with the information, tools, documentation and capital they need is essential to assuring success for the entire supply chain.” But don’t stop with tools and financing programs. Work with and develop suppliers and put supplier management training and education front and center in these efforts.

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