The Importance of Supplier Management

The importance of implementing supplier management can be analysed at two levels, the technical and strategic levels.

Technical Level

1, reduce costs. Cost is the “forever pain” of enterprises, according to the U.S. survey shows that in the U.S. manufacturing industry procurement costs accounted for about 40%-60% of the unit cost of products, procurement costs will increase with the concentration of core capacity and the proportion of business outsourcing, so suppliers directly related to the final cost of the product.

2, improve product quality. Willis and Huston’s 1990 research showed that 30% of quality problems are in the supplier area, and good supplier management can effectively improve product quality.

3, reduce inventory. Reducing inventory pressure allows manufacturers to pass on front-end inventory to suppliers, which is detrimental to partnerships. Supplier management can coordinate inventory management.

4, shorten the delivery time. 80% of the product delivery time is caused by the supplier, shorten the delivery time of the product should start from the source.

5, integrated manufacturing resources. The rapid development of information technology and Internet technology provides the necessary conditions for modern manufacturing enterprises to realize the real-time transmission and exchange of information technology across regions and industries.

Strategic Level

1, integrated supply chain. The supply chain is composed of node enterprises, which realize the value-added process of supply chain through functional division of labor and cooperation, driven by demand information.

2, enhance the core competitiveness. With the focus of enterprises on core competitiveness and the development of core business, from the outside to obtain resources through supplier participation in the new product development to enhance their core competitiveness.

3, to help the development of new products. Getting suppliers involved in new product development helps companies improve their core competencies.

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Policies for vendor relationship management

A win-win relationship has become a model for the operation of supply chain enterprises. Therefore, in order to reflect the idea of supply chain in procurement management, the management of suppliers should focus on how to establish win-win cooperation with suppliers and maintain win-win relations.

(1) Information exchange and sharing mechanism

The exchange of information helps to reduce speculation and to promote the free flow of important production information. In order to enhance the exchange of information between suppliers and manufacturers, we can start with the following:

1, carry out the program for suppliers and manufacturers often regarding job planning, quality control information exchange and communication, to maintain the consistency and accuracy of information.

2, the implementation of parallel engineering. Manufacturers involve suppliers during the product design phase so that they can provide information on the performance and functional requirements of raw materials and components, create conditions for the implementation of QFD (Quality Function Configuration) product development methods, and translate the user’s value requirements into the quality and functional requirements of suppliers’ raw materials and components in a timely manner.

3. The establishment of a joint task force to address issues of common concern. A team-based working group should be established between suppliers and manufacturers, comprising relevant personnel from both parties, to address the supply process and the problems encountered during the manufacturing process.

4, suppliers and manufacturers factory visits. Suppliers and manufacturers purchasing departments should visit each other on a regular basis to identify and resolve their difficulties and problems in the course of their cooperation activities in a timely manner, so as to facilitate the establishment of a good atmosphere of cooperation.

5, the use of electronic data (EDI) and Internet technology for rapid data transmission.

(2) Incentive mechanism for suppliers

To maintain a long-term win-win relationship, it is very important to motivate suppliers. In the design of incentive mechanism, we should embody the principle of fairness and consistency to enable suppliers and manufacturers to share success, but also to enable suppliers to experience the benefits of a win-win mechanism.

(3) Reasonable supplier evaluation methods and means

In order to motivate suppliers, it is necessary to evaluate the performance of suppliers and motivate them to continuously improve. Through evaluation, the results are fed back to the supplier, and the root causes of the problem are jointly discussed with the supplier, and appropriate measures are taken to improve it.

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The Importance of Supplier Management

The Importance of Supplier Management