1, determine a set of business goals and objectives Before you participate in the supplier management process, it is very important to determine a set of business goals and objectives that suppliers need. It will emphasize the requirements of each department for third parties, so that you can map related suppliers to each requirement without duplicating workload and resources. These goals also help to evaluate the performance of suppliers compared with the goals communicated to them.
2. Determine the relevant criteria for supplier selection Once you know the goals and requirements that make supplier participation necessary, you need to define the selection criteria to select the supplier that can provide the greatest value for the requirements.
Although the selection criteria depend on the type of enterprise and its demand for suppliers, the standard measures include pricing, past work quality, industry recognition, legal reputation and so on. Enterprises also choose relevant suppliers by participating in RFQ, RFQ and RFI, especially when the demand is great.
3. Evaluating and selecting suppliers The next step is to evaluate all relevant suppliers according to the determined selection criteria. Most enterprises evaluate suppliers according to their quotations. However, it is equally important to consider other criteria you have identified.
Evaluate the quotations and suggestions of potential suppliers to ensure maximum cost savings. Analyze the terms and conditions to understand how the supplier plan meets the requirements of the enterprise. At the same time, make sure that you conduct a comprehensive and complete analysis of the strengths and weaknesses of suppliers and study how threats and opportunities from the external environment affect your cooperation with suppliers.
4. Negotiate and sign contracts with the selected suppliers. Now that you have selected the relevant suppliers, you need to carry out the contract process and finally let them join. Ensure that all relevant stakeholders participate in the contract process to gain valuable insights on how the contract can ensure the maximum delivery value. In many business cases, the contract process is executed by the finance/procurement team and the senior management of the business department, without consulting the team that carries out daily work with the supplier.
Cooperate with suppliers to ensure the smooth negotiation process and reduce obstacles.
5. Evaluating supplier performance The supplier management process will not end after selecting suppliers. After they are selected and hired, you need to evaluate their performance regularly to see to what extent they have achieved the set goals and requirements.
In order to ensure that the evaluation is effective, KPI should be established to measure performance. This will help to deeply understand the areas that need improvement and maximize the performance of suppliers. It also tells us how effective our supplier management process is and how to further optimize it.