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.
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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.
The vast majority of retailers work with a network of suppliers. Merchandising teams need a methodical communication process.
Your supplier management strategy should consider:
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.
Several things you need to accomplish for your supplier management strategy to be successful:
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.
Generally, there are 3 types of suppliers that your organization will work with:
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:
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:
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:
Understanding these distinctions and caveats will help you make informed decisions about working with manufacturers, wholesalers, and distributors.
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:
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.
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.
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.
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:
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.
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:
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.
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.
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.
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.
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.