It goes without saying that pursuing a new relationship is hard, whether it’s business or personal. In order to land a strong connection in either realm, you have to be willing to put yourself out there. Strong relationships come with a myriad of benefits and this is doubly true in the world of business. Lifecycle management gives businesses and suppliers the ability to form strong bonds through the use of aggregated data and visibility. Strong supplier relationships mean better supply chain management, and software makes forming these partnerships easier.
When suppliers enjoy working with a company, they are far more likely to pass on savings and price cuts. So it’s always worth investing in constructive, rewarding interactions with partners and affiliates. In fact, supplier lifecycle management should be central to your procurement processes. If you want to maximize the value of your external relationships, you’ve got to keep a close eye on them. Nurture them, expand them and grow them into loyal, mutually beneficial arrangements.
What Is Lifecycle Management?
While supplier lifecycle management may be the prime focus of this article, it’s important to have a strong baseline understanding in place before diving deeper into the topic. Lifecycle management is an essential process that involves multiple legs of a supply chain. At its most basic, this is an end-to-end approach that can be applied to products, suppliers, facilities, applications and more. For our purposes, supplier lifecycle management will be the focus, although managing the lifecycle of a product is also a valuable practice within a supply chain.
As far as maintaining relationships with suppliers goes, this practice manages external vendors with as much transparency as possible. Suppliers give potential clients a look at their inner workings to demonstrate the value of their services. Once a business is comfortable with the way a supplier functions, they extend the same visibility to the supplier. This open supplier/business relationship allows each party to serve each other at maximum efficiency.
Eight Stages of Supplier Lifecycles
Most supplier lifecycle management solutions split the journey into eight key areas. They start with the need to source suitable candidates and end with the long-term care of profitable, productive relationships.
This is where the journey begins, and it involves searching for or appealing to, suppliers interested in starting a new relationship. Oftentimes, businesses advertise their needs as they’d advertise for an open job position. Potential suppliers are invited to register their interest if they feel they can fulfill the requirements.
Again, much like a recruitment search, the business then assesses these candidates. In order to avoid wasted time and resources, it’s important to eliminate suppliers that aren’t suitable. There are all kinds of ways to make a determination, from scorecards to independent evaluations, direct discussions and on-site inspections.
After assessing all of the candidates, the field of suppliers should be sufficiently narrowed down to make a choice. The decision will have an impact on every part of the business, so take your time. The goal should be to select an organization that is capable of handling long-term interaction. You don’t want to put a lot of effort into securing a supplier and then have them terminate the relationship after a year. No one likes sudden breakups.
Part of building a long-term relationship is successful onboarding. The new affiliate must be properly inducted. While the supplier has already agreed to meet requirements, they can only do so with enough information about the how, when, what and where of it. Onboarding is also the perfect opportunity to set up monitoring processes that measure performance and valuable data collection.
5. Supplier Performance
Consistent monitoring is a standard part of supplier management. If you don’t keep a close eye on transactions and communications, there’s no way to know if they’re beneficial. Supplier lifecycle management software makes this easy, as it provides a window into the entire journey. Businesses can isolate and assess the productivity of their suppliers at every stage, from purchase to delivery.
6. Identifying Risk
Obviously, the goal should be to eliminate as many risks as possible. However, you can only do this if you identify them first. Risk management is designed to protect your business in the event of a breach of contract, late deliveries, data loss, quality failure and more. No matter how much you trust a supplier, it’s essential to safeguard yourself against unexpected crises.
7. Monitoring Supplier Development
Supplier development becomes a concern after you know the relationship is a valuable one. It sees a business work closely with external partners to try and streamline transactions, which is beneficial for both parties. The faster a supplier can deliver on and close individual purchases, the more money they’ll earn and the more efficient your operation will be.
8. Supplier Management
The final stage of supplier lifecycle management is maintenance. If a relationship is worth holding on to, you’ve got to continue to invest in its future. This is absolutely vital because it’s really the broader objective of all of these processes. The goal, from start to finish, is to create lasting, profitable partnerships.
How Software Helps Supplier Lifecycle Management
According to a recent study, nearly 60% of businesses are in the process of completely revamping their lifecycle management practices to deal with the evolving conditions of the world market. The common factor between them all? Integrating lifecycle, supplier and vendor management software solutions.
Outside of removing time-consuming manual processes and reducing human error, lifecycle management software conveys many other valuable advantages to both suppliers and businesses that adopt them. Benefits go both ways here and the right tool can optimize both sides of the equation.
Assessing Supplier Risk
Without software in place to drill down into the inner workings of a supplier, it can be very difficult to evaluate the risks of a long term relationship. Going in blind to something that helps define the efficiency of a supply chain is a recipe for trouble. A supplier can pass on performance metrics, but lifecycle management tools add credibility to their claims. After all, if a supplier has nothing to hide, allowing a future partner to see how they work shouldn’t be an issue.
Open lines of communication help keep supply chains moving. Without the ability to quickly talk to a manager, team members, suppliers, manufacturers and other important parties, everything would soon bog down. Procurement specialists need to be able to reach their suppliers fast in case urgent changes need to be made. Without an easy way to get in touch, a business could easily fall behind demand or simply be out of the loop. A proper lifecycle management platform contains features that make communicating with suppliers as easy as sending an instant message.
Enforcing Compliance and Regulations
Each business has unique requirements and this remains true within supplier relationships. A company that deals with items that require compliance with specific laws or regulations needs to be able to trust their suppliers to do the same thing. If an organization that deals with medical tools, supplies and the like cannot trust a supplier to take necessary precautions with their products, then they should definitely be avoided.
The single best way to optimize supplier lifecycles is with a targeted software solution. Technology is an invaluable asset because it takes much of the manual work out of generation and maintenance. Lifecycle management software allows businesses to focus on strengthening relationships, as they’re no longer spending time chasing after invoices, filing documents or writing reports.
Plus, the more visibility you have when it comes to your own organization, the more honesty you can offer suppliers. Trust is a big part of modern contracts. The best way to build stable bonds is by listening and responding to concerns in an authentic manner. It’s pretty simple: just put your suppliers at the heart of the business and make them feel important. If you do that, you’ll have a long, successful run with your suppliers.