To stay ahead of a competitive market and keep operations costs low, procurement teams need to maintain strategic vendor relationships that offer reliable quality while maintaining service level agreements.
It all starts with creating a shortlist of reliable vendors, a selection process that requires more than just comparing prices. Here are a few strategies procurement teams can use to find potential vendors and establish them as trusted partners.
Making strategic procurement decisions
Start with what you know
Starting with what you know when it comes to strategic supplier selection is critical because it allows companies to leverage their existing knowledge of their operations, requirements, and priorities to establish criteria from which to select suppliers.
This approach enables managers to create a framework for identifying the suppliers that have the capabilities, expertise, and resources that meet company-specific needs. This process can help whittle down a long list of vendors used across sites and departments, a mistake that can result in mounting costs in the form of rogue spending.
This is crucial for teams with specific and recurring maintenance needs. Without reliable maintenance and spare part suppliers, operations risk downtime and asset failure. Losing revenue in terms of production and sinking costs into extensive repairs because of unreliable vendors can be mitigated by creating and searching for suppliers that meet specific performance criteria. Some considerations for teams as they make these selections include:
- Delivery time
- Product quality and availability
- Quality control processes
Know where to look
Broadening your scope for reliable vendors may involve searching through multiple channels. One of the most common sources is industry trade shows and exhibitions. These events bring together industrial suppliers from specific industries, allowing organizations to see the latest products and services and network with potential spare part suppliers.
Another source for finding potential suppliers is online supplier directories and marketplaces. These platforms offer a searchable database of suppliers that enables organizations to identify suppliers that meet their specific needs. Many of these platforms also allow organizations to compare suppliers based on their pricing, quality, delivery times, and other criteria.
Weigh out your options
One way to weigh out options when it comes to strategic supplier selection is to create a scoring matrix based on Key Performance Indicators (KPIs) established during the supplier selection process.
Sourcing managers should assign a score to each supplier based on how well they meet the criteria. The scores can be weighted based on the importance of each criterion, enabling decision-makers to identify the most suitable supplier for their organization or business unit. Through this approach, teams can evaluate suppliers systematically and objectively.
Maintaining strategic vendor relationships
Collect and analyze procurement data
By collecting and analyzing procurement data about supplier performance, organizations can identify which suppliers are meeting their requirements and which are not. This information can be used to evaluate suppliers based on their ability to deliver on time, the quality of their products or services, and their responsiveness to customer needs.
However, manual assessments can slow down this process and lead to inaccuracies, as it becomes nearly impossible to keep up with the rapid changes in supplier networks. Data can get lost, duplicated, overwritten, or inaccurately recorded. As a result, managers can no longer rely on their own data to make informed business decisions.
Investing in materials management software can streamline the process of collecting and analyzing procurement data. These tools house supplier data in a single, centralized location. Natural language processing tools make it easy to manage and measure KPIs without requiring procurement teams to scour through contracts and terms.
Create comprehensive contracts
Creating a comprehensive contract is a vital component of the supplier selection process because it can provide clarity and structure to the supplier relationship. A well-written contract should clearly define the responsibilities and expectations of both parties, reducing the risk of misunderstandings and conflicts between the organization and the supplier. These details include but aren’t limited to:
- Delivery times
- Product quality
- Payment terms
- Dispute resolution procedures
Manually storing and accessing contract terms can lead to significant challenges down the line, especially if a vendor proves to be unreliable. This can delay the decision-making process, especially during times when an immediate response is required.
A cloud-based solution, however, can make it easier for organizations to establish and maintain successful supplier relationships. Natural language processing transforms manual contracts into easily searchable information, making supplier insights available faster than previously capable.
Develop a strategic procurement plan you can communicate with vendors
It’s important to develop a clear plan that details an organization’s goals, objectives, and expectations for supplier performance and quality. By communicating this plan to potential vendors, managers can help to ensure that the organization is selecting spare part suppliers that are aligned with its strategic objectives. Furthermore, a clear plan eliminates any confusion and ambiguity, allowing suppliers to provide what’s expected of them from the get-go.
Using software that’s backed by artificial intelligence means businesses no longer have to rely on biased experiences or “best judgment” to come up with strategic plans. Rather, these intelligent solutions analyze existing data, identify patterns in current trends, and simulate models that predict future behaviors much more accurately than a human ever could. The result is actionable insights that are based on data rather than guesswork.
Implement your procurement strategies with an innovative MRO tool
It’s important to select suppliers that bring increased cost savings, have high growth potential, give a competitive advantage, and can build lasting value.
By using a data-driven approach, companies can not only select the right supplier that fits their company-specific needs but can also strengthen those relationships when moving forward. Learn how organizations can choose the right MRO vendors through intelligent materials management.