What we often see in supplier management is that the focus is mainly internal, based on information you have received from your contact person, or data available in your CRM system. But data analysis of your supplier and its market can help you, both, reach your goals.
In this blog we address three best practices in Supplier Management. After reading the article you will know how the analysis of public data can complement your company’s procurement strategy.
Make supplier analysis part of your daily job
Your suppliers play a big role within your company. Without supply of packaging materials, employment agencies, logistics and, not to forget, energy and gas, it’s hard to run your business. Though, the negotiations with your suppliers most of the time take place only once a year, and that’s when you usually prepare.
But so much more is happening than just at that one moment in time. By making supplier & market analysis part of your daily job, you will make sure to stay continuously up-to-date and focus on more than just prices.
You want to make sure you know your facts. A fact-based conversation doesn’t have the goal to point out weaknesses of your supplier, it helps to open up the conversation. Find out what is happening in the market, and how you can tackle potential problems together.
Read news articles about developments, expansions and acquisitions, and keep track of the financials of your supplier and their competitors. Take the chance to learn from other parties, also the ones you might not intent to work with in the first place. They can still offer you insights for future developments.
Choose ease of management in procurement
Keeping track of your suppliers can be a time-consuming job. Not just from the strategic side, but also in your daily management of the supplies. As a retailer you want to avoid being too dependent on one big party, but too many suppliers isn’t a good thing either.
Your goal is to find the sweet spot in procurement where you can work with ease of management. A spread of the risks but still being able to stay in the loop.
Find out if a supplier is able to participate in your goals
One of the metrics to look out for when analyzing your supplier is profitability. You can use this data to compare it with the numbers of other players in the market, to see if the price you are paying is fair. Although over the last years we saw the price competition between retailers grow bigger and bigger.
Our CEO, Jeroen Lustig, commented on the situation: “In my opinion, we have reached a turning point because of an (over) excessive emphasis on price competition between retailers and an excessive increase in scale in food chains. Consumers no longer want that either. After years of bigger is better, you see more and more room for new concepts that create value in a different way, such as Crisp, The Flower Farm or the Vegetarian Butcher. It’s a wake-up call for the established order that change is coming.”
Knowing that: if a supplier is not targeting healthy profit margins, he won’t be able to spend money on innovation. When one of your goals is to create a more sustainable product, is it not just your footprint that has to be taking into consideration, your supplier’s counts too. Think of a more sustainable production process or spending less kilometers for transport.
Working with a partner that is financially healthy gives you the opportunity to work on strategic company goals together.
Final thoughts
Before going into supplier negotiations, you want to know how depended you are on your supplier and vice versa. Having straight what your goals are within a certain partnership and knowing your options when these whishes can’t be met, are crucial in your preparation. Supplier management based on data will help you create a solid procurement strategy.
In our Procurement Report we dive into the metrics that will help you in your supplier management, and the insights you can get out of this data. You can download the full report here.
