How to manage suppliers effectively

Once read “why can Toyota last for a hundred years?”? After reading Toyota’s supplier management model, we can only lament that it is inferior. 》Such an article, which describes Toyota’s supplier management model. In addition to strict requirements for suppliers and strict commitment to suppliers, mutual achievements between Toyota and suppliers are well-known. Perhaps this is the highest level of effective supplier management for enterprises, which is worth learning from. So how to manage the suppliers effectively? Although Toyota model has a certain reference value, it has to go back to understand the essence of supplier management and what needs to be done to achieve effective management. As Peter Drucker, the master of management, said: managers do exactly the same work, but they work in different ways.

What is supplier management?
It refers to the general term of comprehensive management of understanding, selection, development, use and control of suppliers. As the strategic core resource of the whole supply chain, suppliers directly affect the performance of the whole supply chain. Good supplier management can shorten the delivery cycle, improve product quality, reduce costs, and improve the adaptability of enterprises in the market competition.

Before we want to know how to manage suppliers effectively, let’s take a look at the main aspects of supplier management?
From the above figure, we can see that supplier management includes three aspects: supplier recognition, supplier performance and supplier coaching. If the enterprise purchase needs to manage the supplier effectively, we can think and design from these three aspects first. In fact, there are five dimensions for effective supplier management: relationship building, selection evaluation, performance, incentive and conflict management.

For the development of suppliers, including the relationship between existing suppliers and potential suppliers, it is necessary to grasp the seven processes of searching, primary selection, field investigation, evaluation, negotiation, trial order and formal relationship establishment; the selection and evaluation of supplier relationship is the core of the whole procurement system, and the details that need to be effectively controlled include quality, cost, delivery, service, etc., as well as financial status and technical ability To build strategic cooperation, we must pass performance appraisal, which can be evaluated from quality, technology, delivery, service, cost and other key aspects. Just like the relationship between Toyota and its suppliers, they promote each other and achieve each other. Establishing a reasonable and effective supplier incentive strategy is conducive to improving the enthusiasm of supplier cooperation. The last and most important point is that effective handling of conflicts will improve the operation efficiency of the supply chain and improve the cooperation relationship between enterprises. If not handled properly, the competitiveness of the supply chain will be weakened.

In fact, today’s social suppliers have become a strategic chip. If an enterprise wants to establish its own competitive advantage in the competition, it must manage its suppliers effectively to obtain their support and cooperation. To achieve effective supplier management, we can use advanced ERP management software under big data and cloud computing, such as the familiar SAP ERP management system or the procurement management suite, which can easily meet the effective supplier management of enterprise procurement.

For a more comprehensive understanding, consult the acloudear — SAP partner.

This article "How to manage suppliers effectively" by AcloudEAR. We focus on business applications such as cloud ERP.

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