Supplier Management

Businesses today are more reliant on suppliers, third parties and outsourced relationships than ever before. Regardless of what business you are in, suppliers play a key role in the success of your business. Organizations are no longer dependent on local suppliers but also have information about supplier based in any corner of the world, thanks to e-commerce, globalization and the ever changing technology. In fact, the supply chain has become globally dispersed. To manage the globally dispersed business is an arduous task. To succeed in this complex environment you should know your suppliers business processes very well because ultimately it drives the organizations business success. A robust Supplier Management process will make sure that the value for money is delivered.

Supplier Management Process

When we talk about the role of supplier management process in IT, it basically is managing the suppliers and the contracts to support the provision of IT services to the business and at the same time it ensures that suppliers meet the terms, conditions and targets of their contracts and agreements.

A good Supplier Management process should include:

Evaluation of suppliers and their contracts:

Customized contracts with the supplier has to be made to include the services that the supplier has agreed to provide and at what cost. It should include the scope of the services, roles and responsibilities, basic terms and conditions, payment terms, commitment to change and investment, legal obligations etc. The agreed SLAs and KPIs should be clearly documented for future use. The penalty clauses should be mentioned in case the SLA is breached and any of the involved party does not fulfill the promises they made in the contracts. Where applicable critical contracts should also be reviewed by the legal team.

Categorization of the suppliers and contracts:

An organization may have multiple contracts with one supplier or multiple contracts with multiple suppliers in any case for immediate access to the details of the contract there is a need to categorize the suppliers and contracts. The suppliers are categorized based on the services, risks and cost associated with each supplier.

Repository for maintaining suppliers and contracts information:

There should be a database where details about the organization’s suppliers, the products / services each supplier provides and the contract details are stored.

Managing suppliers and their performance:

Review of performance reports should be conducted on a regular basis to check if the supplier is providing the services as per the agreed upon SLAs and KPIs mentioned in the contract. Also check if the supplier is providing service as per the business priorities.

Review of Contract:

On a regular basis the contract must be reviewed to check if the contract is continuing to fulfill the business needs. To ensure that the partnership with the supplier is profitable for the business. A review must also be conducted to check if renewal of the contract is needed or not, or if there is need to sign a new contract with the same or different supplier and the current contract needs to be terminated or not.

Service Improvement Plan:

It is important to have service improvement plan meeting to analyze the current services being offered and find out areas where service can be improved.  Decide the appropriate improvement action that should be taken for the benefit of the business.

With the supplier management process in place your organization, you can ensure that the IT services are aligned to the business needs and expectations. And as always – value for money is obtained from the suppliers.

About Author:

Rohan Khanvilkar is a consultant in Systems Plus Pvt. Ltd. Within Systems Plus, he actively contributes to the areas of Technology and Information Security. He can be contacted at rohan.k@spluspl.com