Tips to simplify designsThe three pillars of the procurement process are purchasing, contract management, and supplier management.
While purchasing and contract management might have more obvious upfront benefits, neglecting the significant benefits offered by effective supplier management can lead to issues in effective procurement. Think of it like trying to sit on a three-legged stool where one of the legs is far too short.
To avoid such imbalances in your procurement procedure, we’ve put together this brief, but detailed, guide to supplier relationship management.
What is Supplier Relationship Management?
Supplier relationship management (SRM) is the process where an organization assesses the potential contribution of a given supplier to the success of that organization’s aims.
As a result, SRM allows businesses to identify and incept tactics that allow them to optimize a supplier’s performance and create strategic and holistic workflows that put those tactics into practice.
In short, supplier relationship management allows you to make the best of your supply chain.
The Supplier Management Process
The five basic steps of supplier management process are:
1. Qualification
At this stage, the business evaluates the potential supplier to determine if they are able to provide the necessary goods or services to a quality and time frame that suits the business’s needs.
2. Onboarding
Next, the supplier’s details need to be collected and entered into the organization’s internal systems.
From there, the internal procurement process needs to be updated to allow the company to start trading with its new supplier.
3. Classification
The classification process allows the company to place suppliers into specific categories based on internal metrics. That might include, but are not limited to: supply risk, the criticality of the supplied goods or services, and the total amount of procurement spend.
4. Collaboration
One of the most commonly overlooked sections of the supplier management process is collaboration, and it’s often where the most value gets left on the table. Streamlining your supply chain on paper means nothing if the people making your parts don’t have the context they need to do their job well.
Close collaboration with suppliers creates visibility across the entire supply chain, not just at the delivery stage, but throughout design, quoting, and production. When your engineers can talk directly to the people making their parts, design issues get caught earlier, tolerance questions get answered faster, and the risk of receiving parts that don’t meet spec drops considerably. That kind of back-and-forth is hard to replicate through a purchasing team acting as the go-between.
Collaboration also allows both your organization and your suppliers to pull toward the same goal. Miscommunication is expensive. A misread drawing, an unanswered question about material spec, or a change request that reached the wrong person can cost more to fix than the part itself. The closer the working relationship, the fewer those moments occur.
5. Evaluation
The final stage of the supplier management process is evaluating the performance of a given supplier, both in terms of their ability to fulfill their contractual obligations and using metrics. Metrics include price competitiveness, lead-in times, delivery time dreams, and product quality.
Another important metric to take into account is their willingness to collaborate to make improvements in the procurement process.
While it is important that your company puts the required effort into SRM, it should always be a two-way street between you and your suppliers.
Why Do You Need to Manage Your Relationship With Your Suppliers?
There are several benefits associated with paying as much attention to supplier management as purchasing and contract management, including:
Greater efficiencies — When you work closely with suppliers on improving the sourcing and production process, you find the inefficiencies that neither side could see alone. A supplier who understands your production schedule can flag lead time risks before they become emergencies. An engineer who can talk directly to the shop floor catches DFM problems before they become rework.
- Greater visibility – Black-box supply chains fail quietly. By the time you know something has gone wrong, the parts are already on a ship or sitting in a warehouse. Closer supplier relationships give you earlier signals: a heads-up about a material shortage, a photo of a dimension that looks borderline before it ships, a conversation about a tolerance that the supplier isn’t confident about hitting.
- Reduced risk – The most costly supply chain problems are usually communication failures. Open, direct communication between your team and your suppliers reduces the chance of parts being made to outdated specs, shipped without inspection reports, or built by a shop that wasn’t actually capable of hitting your requirements.
- Supply chain consolidation – Once you have a clear picture of what your suppliers can actually do, you can make smarter decisions about who to keep working with. Many engineering teams discover they’re splitting orders across four suppliers when two well-matched ones would handle everything better and more consistently.
- Better prices – Suppliers price risk into their quotes. When they know you well, trust your drawings, and expect repeat business, that risk premium comes down. Long-term relationships with reliable buyers consistently yield better pricing than one-off orders placed through platforms where the supplier has no idea who they’re working with.
Tips for Great Supplier Relationships
While the exact nature of supplier relationship management will depend on your business and the exact nature of your suppliers, there are some basic tips that can help with any SRM process.
Build Strategic Partnerships
Rather than seeing your suppliers as simply part of the process, or even worse, a necessary evil, instead, look to build strategic partnerships with them.
Closely collaborating with your suppliers can lead to a whole host of benefits. These include better pricing and a better holistic understanding of your supply chain, to supply risk mitigation and a better return on your investment.
Having a supplier proactively working towards your company’s goals as a part of a strategic partnership will always yield better results.
Set Expectations (Both client and supplier)
Setting expectations during the supplier onboarding process is the best way to make sure you and your supplier are both on the same page.
This has to be a two-way street, in which suppliers are also receptive to the expectations of suppliers, particularly around payment timeframes.
Being clear and upfront at the beginning of a supplier relationship can help to head off supply issues caused by miscommunication at critical moments.
Communicate Effectively
Open and honest communication is the bedrock of any successful partnership. That is no different when it comes to communication with your suppliers.
Make sure that there are clear and optimal communication channels between you and your suppliers. As a result, you can create further cost-saving efficiencies and make sure that any issues are raised and addressed promptly.
Proactive Performance Management
The Evaluation step of the supplier relationship management process allows you to proactively manage your suppliers. Grade them against relevant key performance indicators (KPIs) and then use your open communication channels to address any issues that arise from that evaluation.
How can Jiga help?
Managing supplier relationships well requires the right information at the right time, and most of the friction in the process comes down to context getting lost between systems, teams, and email threads.
Jiga addresses this by keeping every part of the supplier relationship in one place. When you send an RFQ, communicate with a supplier, review quotes, approve inspection reports, and track an order, it all happens on the same platform under the same project. Your team sees the same history your supplier sees, so when questions come up or something needs to change, nobody is working from a different version of events.
For the evaluation stage of SRM, Jiga tracks supplier responsiveness and performance across every order. Rather than assembling a scorecard from memory or scattered data, you’re working from an actual record of how each supplier has performed over time. That makes performance conversations more productive and sourcing decisions easier to justify.
For collaboration, the direct communication model means your engineers can talk to the people making their parts without a middleman filtering the conversation. Questions about tolerances, material substitutions, or drawing revisions get answered by the person who actually needs to answer them, which is faster and more reliable than routing everything through a sales contact.
Focus on strategic tasks instead of administrative tasks
The Jiga marketplace allows you to significantly reduce the time you spend on preparation, sourcing, and approvals, so you can get back to the important strategic work needed to grow a successful business.
Our platform’s AI engine helps you to compare suppliers. You can then instantly identify opportunities for cost and lead time reduction without asking suppliers to quote.
This means you can find opportunities to reduce costs and increase competition without compromising the quality of the relationships you’ve already built.
And so much more
The comprehensive Jiga platform streamlines the entire procurement process, from sourcing the right supplier from our customized marketplace, automating and tracking your orders, through to analyzing your purchasing, and actively collaborating with suppliers.
Jiga handles the back end of the procurement process for you. This includes shipping, payments, and legal agreements. Meaning, you can save huge amounts of time on administrative taste and get back vital strategic planning.
Our AI-assisted system means you can get a quote, any time of day in any timezone. And, every order is checked by a human expert to make sure there are no errors.
To keep you as protected as possible, Jiga keeps all payments in an escrow account. So, you’ll only pay once you’ve received your parts. Moreover, we sign strict NDA agreements with each member in our network to keep your data private.
Should any kind of problem arise, you’re protected by Jiga Buyer Protection. We’ll make sure we solve any issues for you.
To see how Jiga’s all-in-one procurement and supplier management platform can benefit your business, see it in action today.
