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Figure 39: SUPPLY MANAGEMENT PROCESSES
SUPPLIER LIFE CYCLE MANAGEMENT
CREATE NEW VALUE
SUPPLIER RELATIONSHIP MANAGEMENT
ENHANCE VALUE
PERFORMANCE MANAGEMENT
ASSESS VALUE
CONTRACT MANAGEMENT
INFORM
CAPTURE VALUE
INFORM
INFORM
STRATEGIC SOURCING
Pre-award
Post-award
For the so-called ‘long tail’ of suppliers (e.g. tactical suppliers), which includes one-off purchases and low-value, low-risk supplies, suppliers are not actively managed unless otherwise required (in other words, managed by exception). For the remaining suppliers, organisations employ Contracts Management (CM) strategies to ensure that the supplier contracts generate the agreed value. However, the value that is derived from a contract tends to diminish over time unless the supplier is actively managed. This is addressed by Supplier Performance Management (SPM) strategies which cater for continuous improvements and performance over and above the agreed levels. Finally, for those suppliers that matter most to the organisation, a more collaborative type of management should be used, Supplier Relationship Management (SRM) .
The table below provides an indication of the level of management for each of the supplier segments.
SRM SPM CM MANAGEMENT BY EXCEPTION
Strategic suppliers
Preferred suppliers
Approved suppliers
Tactical suppliers
Only about a fifth (18%) of organisations that participated in our survey has supplier management processes in place. This suggests there is a lot of room for improvement in this area. Almost three-quarters (71.9%) said they share information with their suppliers, and two- thirds assess the performance of their suppliers.
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