Supplier performance management is a core component of running a healthy supply chain. For typical procurement and/or finance teams, who rely on personal relationships, it's only possible to focus on the short head of larger suppliers.
But with a huge amount of project value being awarded to an organisation's smaller suppliers, there are significant benefits to improving long tail supplier performance as well.
- How to apply supply chain management best practices to a large network of suppliers
- The benefits of improving long tail supplier performance
- Who is responsible for managing the performance of long tail suppliers?
- How to use software to automate and scale supplier performance management
How to apply supply chain management best practices to a large network of suppliers.
When using SoWs as a work delivery model, the art of supply chain management ensures an organisation can reliably complete the projects or outcomes required to stay profitable. In summary, it means managing a supplier network to ensure the right suppliers can provide the right services at the right cost.
As mentioned in the opening, managing a handful of larger suppliers traditionally involves procurement and/or finance teams nurturing personal, manual relationships with each supplier.
Of course, forging personal relationships with a large number of smaller suppliers is not feasible without a scalable, automated process supporting or augmenting the manual efforts.
Much in the same way as how tail spend SoW management platforms make it possible to match, issue requirements to and collate responses from a large network of suppliers, automated workflows can also shoulder the workload of managing the performance of the supplier network too.
The benefits of improving long tail supplier performance
Regardless of the supplier's size, improving supplier performance creates some clear commercial opportunities to leverage better terms or volume-based discounts. In addition to these commercial opportunities, there are also some added benefits to improving the performance of smaller suppliers:
Sharing 'localised' supplier knowledge
Every category manager, department head or procurement strategist has their favoured suppliers - an internal reference of who they consider to be the best and brightest.
The challenge with having this know-how compartmentalised and locked away in their heads is the wider business, other departments, and teams do not always get to benefit.
Tail spend SoW management platforms share this localised supplier knowledge and make it possible for everyone to make better decisions when resourcing statements of work.
Identifying future strategic partners
Another clear benefit for managing the performance of smaller suppliers is to create visibility of the suppliers who are potentially the large, strategic supplier relationships in waiting. This helps future-proof your supplier network and shape your supply chain's strategic direction.
Who is responsible for managing the performance of long tail suppliers?
The responsibility for managing the overall performance of long tail suppliers has to belong to procurement and finance teams. However, the existing, manual, no-tech solutions available to these teams understandably forces their focus onto fewer, larger suppliers.
The solution has to be to improve the reach and scope of procurement and finance teams rather than delegating control and responsibility to individual category managers or departments.
Procurement and finance teams are the only business function with the oversight and visibility of the entire supplier network to make strategic supply chain decisions. The individual buying manager's views may be too narrow or too intermittent to make the best decisions when considering the supply chain as a whole.
How to use software to automate and scale supplier performance management
There are a number of areas in which modern long tail SoW management platforms can provide a solution for organisations to scale supplier performance management:
Onboarding & Document Management
Ensuring long tail suppliers are sourced, onboarded and engaged in a compliant manner is the foundation upon which supplier performance is built. Managing and shaping a supplier's performance against commercial terms or service level agreements is impossible without these documents being in place to begin with.
SoW management platforms can help procurement remove the burden of creating, sending and collating the signed versions of these documents from a large number of suppliers.
The self-managing nature of the supplier's profile allows the procurement team to define the compliant onboarding process and use the SoW platform's automated workflows to guide the supplier through a self-managed process.
In other words, it replaces the 'push-based' need for procurement to manually send document packs with a 'pull-based' process where the onboarding steps are defined once, and the suppliers provide what's required.
Quantitative project budget and timing reports via customised dashboards
Managing a supplier's performance starts with understanding their ability to deliver projects on time and on budget. A couple of issues arise when an organisation relies on individual category managers using spreadsheets to review supplier performance. The first issue is when the collection of performance data becomes too difficult, it simply isn't done. Secondly, even if individuals are able to find, collect and interpret a supplier's performance, they are only able to see a small part of the overall picture.
Using a dedicated SoW management platform is the solution for better quantitative reporting:
- Performance data is automatically collected, removing the need to manually create datasets
- Supplier performance is collected across all projects, providing a complete picture
- Drag-n-drop reports and dashboards can be created on the fly, allowing for easier visualisation of data and sharing of insights
Qualitative ratings and reviews
In addition to the quantitative performance reports, which can show the suppliers best at delivering projects on time and on budget, it is also beneficial for an organisation to collect and use qualitative feedback on its long tail suppliers: Which are best at understanding the needs of your business? Who are the easiest to work with? Who go above and beyond?
Using SoW management platforms makes it easier for an organisation to collect qualitative feedback from your project teams – automated project workflows can ask for feedback and collect responses from all members of the project team at relevant times.
Once you are collecting qualitative feedback on suppliers, an SoW management platform also enables you to view, interpret and rank this feedback - using a star rating system for example.
Another major benefit is the ability to keep your suppliers engaged, even when they are not actively working on a project.
Zivio's built-in engagement campaign tool allows you to segment, target and send email communications to your suppliers to keep them up to date with news and views of your organisation.
Maintaining a healthy supply chain absolutely must encompass managing the performance of long tail suppliers and service providers. To enable procurement and finance teams to scale this management effort, a dedicated, modern, SoW management platform like Zivio must be in place to support and automate best-practice supplier performance management activities.