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Wednesday, March 7, 2012

Goals, Purpose and Objectives of Supplier Management

In the previous chapter, we learnt what Supplier Management is. In this chapter, we are going to go a bit in detail and learn the Goals, Purpose and Objectives of the Supplier Management Process.

Goals of Supplier Management:

The goal of Supplier Management is to manage suppliers and the services they deliver in order to ensure the organization gets the best value from each supplier throughout the lifecycle of the relationship with the supplier. Given the complexity of modern IT service, it is common for individual services to be provided through a mix of internal and external suppliers. Supplier Management has to manage the complexity of relationships with external suppliers in such a way that they all pull in the same direction and, in doing so, deliver services that underpin the service level targets enshrined in SLAs at a cost that represents best value for the organization. A key goal for Supplier Management is to ensure that the optimum value is achieved from the relationship with a supplier, and this rarely means squeezing suppliers until they have no more to offer. The goals of Supplier Management are also about the longer term. The old confrontational Supplier Management approaches are hopefully outdated. Supplier Management today has to be about building long-term relationships, ideally built around shared risk and reward models, where success in the relationship is a mutual goal.

This does not mean that the relationship between the organization and its suppliers is casual.

Purpose of Supplier Management:

A key purpose of Supplier Management is to ensure that effective contracts are in place, ensuring that the supplier delivers according to the terms, conditions and delivery targets contained within the contract. What is understood by an effective contract is crucial. An effective contract is not about driving the price down to a point where the supplier cannot sustain delivery or needs to claw back revenue by holding the organization to ransom over essential contract variations.

Objectives of Supplier Management:

The main objectives of Supplier Management are:
• To develop and maintain a supplier policy
• To establish and manage constructive relationships with suppliers
• To negotiate and agree contracts with suppliers that align with the needs of the business and manage these contracts through their lifecycle
• To ensure, in collaboration with SLM, that contracts that underpin the delivery of other services are aligned with the targets contained in SLRs and SLAs
• To manage suppler performance to ensure they deliver good value for money
• To develop and maintain a supporting Supplier and Contract Database (SCD).

Prev: Introduction to Supplier Management

Next: Scope of Supplier Management

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