Procurement Services experts

Conducting a sourcing review (tender) can be based on numerous motivations, such as the need to reduce costs, consolidate suppliers, simplify operations or because of an expiring contract. 

Regardless of the motives, a thorough, well constructed & implemented sourcing review also allows for a step change in the relationship with your suppliers that will lift supplier performance & elevate value creation from your supplier base.

How does a strategic sourcing lead to improved supplier performance? Done correctly, strategic sourcing assessing the capabilities of suppliers & compares them against organisational requirements to identify the best matched suppliers. This process in itself leads to lower risk outcomes & the potential for greater performance, however there are subtle by-products of the sourcing process that expand the ability to improve performance. Core to these improvements is the fact that consolidating spend instantly makes an organisation more attractive to suppliers, as the potential revenue increases. Being a more attractive customer means the supplier is willing to put more resources & services into your account, which can be utilised to delivery improved supplier performance. 

Lets look at some of those additional resources & services and how they can lead to improved supplier performance-

· Suppliers will assign large accounts with an account manager, whose role is to become the main contact point for the organisation. This person can be utilised for a huge range of activity, including conducting business reviews, escalation point for issue resolution, performance improvement activity, etc.  

· Regardless of your business structure, large suppliers can establish detailed reporting at local or group level. This information is invaluable for activities such as supplier performance monitoring, spend management, optimisation activity, etc.

· The combination of an assigned account manager & access to detailed reporting then allows for formalised business reviews to review supplier performance against agreed KPI’s, identify optimisation opportunities, discuss upcoming projects & products, etc which shifts the supplier relationship from transactional to strategic.

· With formalised roles & relationships between supplier & customer, issues resolution becomes clearer through an issue escalation process.

· Organisations can obtain access to supplier resources such as innovation, continuous improvement & research teams that can help with product development, cost reduction activity plus a myriad of other opportunities.

These resources & services are not automatically put in place once the agreement is signed & require work by both sides to keep the relationship on track. Many organisations make the mistake of thinking that developing a sourcing strategy is the end of the supplier engagement process, however in fact it is just the beginning. 

However, by recognising the supplier resources available at your disposal & applying internal resources to access & manage suppliers, the overall supplier performance can be elevated to levels that create real, sustainable value to an organisation.