Who are the Suppliers?
Suppliers are the third parties or other organizations from where an organization purchases goods or services for their own productions. Good supplier management plays a vital role in an organization’s success! Because the success of an organization depends on how it encages, manages, communicates and maintains the relationships with the suppliers. Poor performance or unexpected /unpredicted bad behavior of a supplier will make major impacts on the organization’s success.
Suppliers are the third parties who supply raw material or any essential goods or services for an organization’s business. As all the essential goods are supplied from the outside of the organization, the suppliers are to be carefully selected, evaluated and maintained properly.
What is Supplier Management? What does it do?
Supplier Management is the process of evaluating the performance of the supplier as per the organization’s needs, ensuring the values given by the suppliers is worth for the money spent by the organization. Apart from this basic work, effective supplier management includes the following activities.
- It makes a clear framework for the suppliers.
- Sets up policies to supervise the supplier’s performance.
- Finds out the areas wherever the performance of the supplier must be improved.
- Makes negotiations and agreements between the organization and its suppliers.
- Makes the agreements that meet the requirement of the organizations.
- Watches the supply of goods as per the contract.
- Maintains the supplier records properly.
- Maintains a good relationship with the suppliers.
Why is Supplier Management Important?
There are many factors that drive supplier management to be very important for the organization’s success. Effective supplier management is necessary for the organizations when it increases the operational scales, the number of suppliers will be increased.
- More suppliers in organizations lead to a complex supply chain.
- The complexity in the supply chain results in high risks of the poor performance of the supplier and unless the suppliers are not managed and evaluated properly.
- Supplier data management is to be maintained very accurately.
- The supplier relationship is to be maintained properly to ensure the consistent performance of the organization without any disruptions.
- Improves the predictability and better understanding of supply chain activities.
- Ability to make quick decisions with a better valuation of the supplier’s performance.
- Finds out and ensures the exact arrival time of essential goods and avoids the disruptions in the process.
- Reliability and high efficiency of suppliers will thrive and improve the profitability of the organization.
- Having inefficient and potentially not good suppliers lead the fall in the organization’s reputation.
Thus, an effective supplier Management is very important for the Organizations’ success.