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Surefront Blog

What is Supplier Management?

Supplier management is optimizing communications and collaborations between your business and its suppliers. You work with your suppliers daily to bring new products and services online. Efficiently managing these relationships is usually a top priority.

That’s why it’s surprising that so few retailers have adopted a solution for effectively managing supplier relations. Instead, most businesses work with each supplier in a one-off, siloed manner—leading to chaotic results.

An integrated product lifecycle management (PLM) tool is one of the most powerful ways to manage supplier relations effectively. We’ll discuss this kind of solution in more detail later.

But first, let’s look at supplier management at its most basic level.

TABLE OF CONTENTS
  1. Supplier management basics
  2. Creating a supplier management strategy
  3. 5 steps for successful supplier management
  4. Creating a supplier scorecard
  5. Selecting the best supplier management software
  6. Automating supplier management with Surefront

Supplier management 101

Put simply, supplier management is all about improving your workflow with suppliers. Product collaboration and purchasing are the two main ways you interact with suppliers. That’s why strategic product and financial data organization are crucial to supplier management.  

Monitoring data performance and updating your supply chain accordingly will hasten your entire product collaboration process. 

Retailers and suppliers are allies. They have the shared mission of coming up with the right product, at the right price, at the right time. Supplier management handles all of the processes needed to help you optimize supplier relations.

Building a supplier management strategy

The vast majority of retailers work with a network of suppliers. Merchandising teams need a methodical communication process. 

Your supplier management strategy should consider:

  • Product data
  • Price history
  • Communications
  • Listing
  • Quotation
  • Sustainability

It’s common practice for retailers to keep both a vendor matrix and vendor scorecards to track, evaluate, and quantify their suppliers’ performance. This helps set precedents for overall performance.

Suppliers are companies that exist outside the scope of your retail organization. They are 3rd-party partners that sell goods to other organizations, most of which then resell those products to the end consumer. 

The difference between successful and unsuccessful retailers often hinges on how supplier relationships factor into the greater product collaboration system. It’s an important part of your overall retail software strategy to bring products to market. 

Supplier management ensures that your organization receives value for the money spent on suppliers and merchandising. You can automate the process with a unified product collaboration platform or try to do things manually. 

Tools for success

Several things you need to accomplish for your supplier management strategy to be successful:

  • Implement policies and guidelines to govern suppliers.
  • Negotiate and finalize legal contracts.
  • Ensure suppliers deliver goods to fulfill agreed standards.
  • Align supplier contracts with overall business strategy.
  • Ensure supplier contracts reflect KPIs set by the retail organization.
  • Manage all relevant data.
  • Cultivate relationships and enhance overall performance for suppliers.

Defined supplier KPIs ensure top-notch products reach customers promptly. Neglecting formal supplier management leads to erratic outcomes, poorer quality goods, and wastage in spending, time, and resources for your merchandising teams. Studies indicate that 79% of companies with well-managed supply chains outperform industry revenue growth averages.

The three types of suppliers

Generally, there are 3 types of suppliers that your organization will work with:

  • Manufacturers
  • Wholesalers
  • Distributors

Manufacturers are at the beginning of the supply chain. They are the entities who actually produce the products. Working directly with manufacturers can be the best way to source products at the lowest possible price (without the costs of middlemen). 

Caveats to note

  • Many manufacturers only want to deal with retailers directly for massive bulk orders.
  • They often need a proven sales record (not great for retail startups).
  • They have less buyer-friendly access to products—fewer merchandising-friendly catalogs, assortments, etc.

These caveats mean communication is key

Wholesalers are traders who buy goods in bulk quantities directly from manufacturers, and then re-sell those goods to retailers. They act as the middleman between the manufacturer and the retailer, providing lower prices for goods sold in higher quantities.

Caveats to note

  • Wholesalers excel at supplying goods in bulk, serving as intermediaries between manufacturers and retailers.
  • Retailers moving large quantities of diverse items benefit from wholesalers' competitive per-unit pricing.
  • However, wholesalers may not suit smaller organizations or those dealing with specialized goods, as their pricing advantages are primarily geared toward substantial orders.

Distributors are also middle agents in the supply chain. Unlike wholesalers who sell almost exclusively to retailers, distributors sell to various parties in the supply chain. Their clients can include wholesalers, retailers and sometimes even direct sales to consumers. 

Another key difference between distributors and wholesalers is that distributors work closely with the manufacturer, generally signing a contract that locks them in to non-compete agreements when purchasing goods from their sources. They also engage in promotional activities to increase sales, where wholesalers do not.

Caveats to note

  • Retailers partnering with distributors typically sign contracts incorporating a significant service fee, impacting their net sales.
  • While distributors may offer competitive prices for specialized products, you must assess the overall cost, including the service fee, to align with your unified product collaboration strategy.

Understanding these distinctions and caveats will help you make informed decisions about working with manufacturers, wholesalers, and distributors.

5 steps for successful supplier management

Retail is a results-focused business. After establishing clear expectations, KPIs, and workflows for your suppliers and merchandising team, you’ll want a method for measuring outcomes. Here are five actionable steps for implementing and maintaining a successful supplier management strategy:

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  1. Onboarding - This step includes identifying, selecting and onboarding suppliers. As you make contact with prospective suppliers and get a feel for their products and services, you’ll want to evaluate their potential for adding value to your business.

    Consider all program integrations and legal contracts—anything that may facilitate the relationship or create hurdles. Your merchandising team should outline goals and criteria for identifying strong supplier prospects that you can use to evaluate any potential partnership.

  2. Development - Development activities should either mitigate declining supplier performance or boost satisfactory performance. This can include: refining communication and purchasing processes, creating a better integrated product lifecycle management strategy, and developing trackable and transparent workflows.

    You'll want to create a template for this and refine it for each unique supplier. To take a closer look at the product development process and other tools of the trade, check out our Comprehensive Guide for Product Lifecycle Management Software (PLM).

  3. Segmentation - You should segment suppliers for the strategy that best suits your merchandising needs. Just as you segment customers for better marketing results, supplier segmentation can help organize your supply chain, assess supplier health, and compare 3rd-party performance in your overarching unified product collaboration strategy.

    Segmentation can include: performance-based pooling, category-based grouping, or other groupings based on procedural similarities. To better understand how to calm the chaos of retail buying, check out our blog series on how integrated PLM tools facilitate the supplier management process.

  4. Performance - In this phase, you should measure supplier performance based on tangible factors such as spend, reliability, and quality.

    Other less quantifiable factors include: innovation potential, uniqueness of products/services, and organizational shifts that could affect performance. This is best done by keeping a vendor matrix or vendor scorecard that evaluates these basic functionalities (usually on a 1-5 scale).

  5. Phasing Out - Your end goal as a retailer should always be to provide the best possible end product for your customer. The phasing-out process occurs when you move away from partnerships with vendors who are not meeting agreed-upon targets, or are falling short of your agreements.

    This can also happen if you discover new suppliers who offer better prices and services than your existing partnerships. As the above graphic shows, sometimes the phase-out step occurs after segmentation when refining your supply chain management process. An integrated PLM tool will help you manage supplier relationships. 

You will repeat these 5 steps as you assess your best moves toward maximum supply chain profit and performance. Yes, there will be some growing pains. But these steps will ultimately guide you toward a repeatable supplier strategy that ensures the continued health of your organization.

How to create a supplier scorecard

A supplier scorecard, aka a vendor scorecard, is a guide that a company creates to track and measure the performance of its supplier partners. This can be used in tandem with your PLM tool to assess new partnership prospects and maintain/improve supply chain health.

The scorecard itself usually consists of a few different categories with quantifiable metrics. Each retailer values different procedures and supplier characteristics above others. For example: One retailer may score a supplier on delivery times and shipment accuracy, while another is focused on product quality and ease of accessing data. 

Creating a system with supplier scorecards to assess vendor performance is one of the most important practices for refining supplier relationships within your lifecycle management system. Although you may have various suppliers with differing strengths and weaknesses, it’s best to develop a supplier scorecard that measures the performance of critical categories. This avoids having to keep track of too many templates.

supply-management_info-graphics-02

Here are the 3 main building blocks for creating your own supplier scorecards to measure vendor performance:

First, you’ll want to gather documentation used between you and your vendor partners. This can include initial requests for proposal (RFP), documents from the discovery process, service level agreements (SLAs), and final contracts. These documents should provide you with the framework and guiding principles for what to expect of your suppliers (and vice versa). 

Using these documents, you can begin to plan the metrics that matter most in scoring your suppliers. You want to streamline the scorecard with only the most pertinent information while keeping enough detail to validate the product lifecycle management (PLM) process.

Second, set the categories and priorities you want to use to grade your suppliers. At this stage, forecast issues and the impacts of different services and logistics from the vendor. Consider what happens if your supplier fails to fulfill each category's function. If the worst-case scenario for a given category will substantially impact your business, it’s worth including on your scorecard.

In most cases, your supplier scorecard will have 3 main categories for KPIs: quality, delivery, and service. Within each of those categories, you can break it down to measurable items. Keep these to around 2-4 measurable items per category to ensure your scorecard is simple enough to be effective. 

Third, it’s time to create and implement your grading scale. For certain categories, you can use a simple “yes or no” approach. For example, if you are answering questions like, “were shipments on time” and “were delivery quantities accurate,” you can go with the "yes or no" approach.

For other assessments, like product quality and customer service, you may want to implement a 1-5 grading scale. For this approach, it is important to define the scores beforehand. Ask yourself "what constitutes a score of 1" and "what constitutes a score of 5" (and every step in between). Document these criteria to set a precedent for continuity to eliminate as much subjectivity as possible from your process.

When using supplier scorecards in your supplier management process, it’s important to remember that they are meant to improve your vendor relationships, not overhaul your entire supply chain.

How to select supplier management software

The integrated product lifecycle management tools you choose to manage suppliers should set your business up for success. They should enhance how you communicate with your vendors, improve how you track and assess their performance, and help you streamline your overarching supply chain. Here’s a checklist of what to look for in supplier management software:

  • Supplier Engagement - You’ll need communications and collaboration tools to improve the workflow between your team and external vendors. Having quicker and more effective communication tools reduces errors and speeds up the process.

    As much as you plan for a repeatable structure, there will always be last-minute changes/issues that arise. You’ll want to have the ability to communicate in real-time with your external suppliers to address these issues as they happen.

  • Project Management - You’ll also need a tool to track and provide workflow transparency. Utilizing product lifecycle management (PLM) software to communicate with your key suppliers enhances accountability and ensures the precision of your supply chain data.

  • Payroll & Accounting Tools - Your accounting department will have its own methods of tracking financial agreements and transactions. Using software to help organize and store this data will save countless hours pouring over endless spreadsheets. This will also help with your annual audit of suppliers and 3rd-party vendors.

  • Ease of Use & Deployment - It’s important to consider how easy your PLM software tool will be to use for your team and partners. For it to be effective, you need the ability to seamlessly share data between your PLM, PIM, and CRM functionalities.

    You want to add layers of value, without adding layers of complexity. The same goes for deployment—you’ll need to assess the necessary logistics and requirements to deploy the software for your team and your suppliers.

  • Training & Onboarding - Similar to the previous step, you’ll also want to have a good handle on the learning curve for your team and your 3rd-party partners.

    Find out how intense the onboarding process will be and what training will be necessary for key stakeholders. Some unified product collaboration platforms provide comprehensive training and support. Others leave it in your hands. Consider your team’s bandwidth before you sign a contract.

  • Compliance & Regulations - Ensure that your chosen PLM tool works with the native guidelines for your suppliers. Manufacturers and other suppliers are often based overseas. So, you’ll need to choose retail software systems that comply with their regulations and your own. The same is true for establishing partnerships with the required business licenses for overseas partners. 

Meet JIA Home, a leading home goods supplier that used Surefront to increase ROI by team member by 150%. Their network of retailers is quickly adopting Surefront as their PLM, CRM, and PIM platform for collaboration and supplier management. 

Supplier management with Surefront

Surefront is the ultimate tool for improving supplier management. Surefront brings retailers and suppliers together with the tools for product collaboration, B2B customer relationship management, data management, and communication—all in one platform

You'll have everything you need for your merchandising and sales process in one place, so you can establish, maintain, and perfect your supplier management strategy. Here are just a few of the critical areas where Surefront's unified product collaboration platform can help your business:

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Seamless Supplier Onboarding

Surefront’s main goal is to connect your internal team with external suppliers and vendors, enabling each relevant stakeholder to access all relevant product data. External partners can always collaborate in the platform via email invitation. 

This is Surefront's key differentiator: full, seamless onboarding of internal associates and external suppliers. Surefront's unified PLM, CRM, and PIM tools make it easy for suppliers to upload their inventory and share organized live showcases, so you can collaborate and streamline your merchandising process.

Built-In Chat Communications

Surefront has a unique blend of product data and management tools mixed with live chat communication. The platform moves you out of decades-old tools like long email chains, spreadsheets and PDFs for product collaboration. It facilitates open and clear dialogue with external partners, which is traditionally one of the most difficult things to maintain in supplier management. 

You can live chat in real time with your suppliers on a highly visual interface and leave notes on specific items.

Pricing Calculator for Negotiations

As you move toward the quotation process and settling agreements, Surefront provides both sides with a pricing calculator that allows each team to have all the important financial information for the given product. This helps in tracking purchase prices, landed prices, and margins. 

The best part? The information you want to remain internal will be visible to your team only. 

Product Information Management

Within Surefront's PIM tool, you can store all relevant product data, which grants you access to a trackable history, specifications, financial information, and notes from both parties. With catalog, showcase, and workflow functionality, all stakeholders can access the information they need and keep track of end-to-end data.

RFQ and Quote Creation

When viewing your supplier’s showcases, your merchandising team can easily select the products that you’re interested in and create a request for quote (RFQ) right in the platform. Your suppliers can then create quotes and send them to you, moving you toward an expedited PO and more efficient agreement process. Data export that used to take three weeks takes three hours with Surefront.  

You don’t want your data to be siloed. Your company’s CRM, PIM and PLM solutions shouldn’t operate in a vacuum, either. Surefront is a Unified Product Collaboration Platform to power growth and ROI. Our patented PIM, CRM, and PLM solutions streamline the omni channel sales, merchandising and product development processes. By combining these essential functionalities, Surefront creates a single source of truth throughout your product lifecycle, sales and listing processes. 

The results? Up to 150% more revenue per employee and a 40% shorter product development cycle is just the beginning. Try our 10x ROI calculator to see your company’s potential profits. Or, skip the noise and book a custom demo with one of our unified product collaboration management experts today. The retail industry evolves quickly and has a lot of moving parts. We do all of the research, so you don’t have to. Stay ahead of market fluctuations, trends and new features by subscribing to our Unified Product Collaboration Management Blog.

Download The Complete Guide for Product Lifecycle Management Software