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Supplier relationships offer different options for performance development depending on their position in the procurement goods/source portfolio. While standard suppliers for standard materials tend to focus on procurement efficiency, bottleneck suppliers are concerned with availability. For lever suppliers and strategic suppliers, on the other hand, the focus may be on building genuine value-added partnerships (e.g. through a deep, mutual integration of development and production). Just like the goals mentioned above, the routes or measures to achieve them, which are ideally developed jointly by both sides, naturally also vary. This is known as active supplier development, in which these ideas for improving performance are jointly defined and implemented (as in the example of the value-added partnership above). Supplier self-development is different: Here, the purchasing department defines the goals (e.g. improving on-time delivery) and the supplier pursues these with independently defined measures.
In order to develop suppliers successfully, you need a clear picture of their current performance - both in terms of strengths and weaknesses. This information must also be available to the purchasing department in order to create strategic criteria sets and measures . The foundation for this is laid by DIG supplier reporting, which queries and evaluates the correspondingly defined key figures depending on the classification of the supplier in the portfolio (see above): Stakeholders in the company are automatically prompted for evaluation at individually defined frequencies (e.g. depending on delivery frequency or on specific occasions such as the first delivery). All data is made available to the purchasing department (or other defined departments/persons) via the platform.
Supplier development serves value creation aspects, which also result from the reduction of procurement risks. Processes in purchasing, logistics and quality management play an important role here. This is precisely where digital solutions for suppliers and internal stakeholders should come into play in order to evaluate offers and deliveries against the background of these perspectives.
The phases of the business relationship are managed on the basis of these evaluations:
- Setting and clarifying procurement specifications
- Supplier sourcing and qualification (supplier analysis and selection)
- Purchase realization
- Evaluation/ensuring delivery reliability
- Continuous improvement (CIP)
- Termination of business relationship and substitution if necessary
The basis of all supplier management is the definition and communication of values (see also our article on the automation of the Code of Conduct). These are essential for all further measures because they influence the weighting of aspects and criteria in the performance assessment. As the management processes are implemented differently in the individual companies, there is no generally applicable solution or specification of the individual steps in supplier management.
A general cycle could exist in this sequence, whereby supplier selection takes place before the market analysis in some companies, but only after the supplier analysis in others:
This sequence of supplier management activities results in different fields of action and associated instruments that can be used accordingly depending on the definition of supplier management in the company:
- Strategy (supplier strategy, risk management and communication strategy)
- Integration(procurement market research, supplier analysis, supplier selection - e.g. with DIG Sourcing)
- Evaluation (supplier evaluation, supplier classification - e.g. with DIG Supplier Evaluation)
- Development (supplier development, supplier qualification - e.g. with ongoing evaluation comparisons and workflows for action tracking)
This illustration shows the influence of concepts in one field of action on other areas of supplier management. For example, the definition of risk factors naturally influences the criteria for supplier selection and analysis (integration) as well as evaluation. This makes it all the more important to think about supplier management holistically end-to-end and to map it with flexible tools for digitalization.
Reduced vertical integration in companies is leading to a shift towards suppliers, who in turn need to be more innovative in order to make a relevant contribution to value creation. This development, which can be observed impressively but by no means exclusively (!) in the automotive sector, means that supplier management is becoming increasingly important.
This makes it all the more important to develop long-term goals in supplier management in line with the supplier strategy (adapted strategies can also be developed for individual, important suppliers). A distinction is made here between three different forms:
- Passive supplier strategy: informing the supplier about the results of the evaluation and the company's objectives - the supplier recognizes this and indicates the measures it intends to take to achieve them
- Accompanied supplier strategy: the results of the supplier evaluation and the objectives are discussed together and necessary measures are identified and prioritized according to their importance
- Active supplier strategy: strategic measures are defined and joint projects and campaigns are carried out
Purchasing is the link between the company and supplier innovations. To do this, however, they must be successfully integrated into the structures and processes (including technical development, logistical integration and production). This can be done with the intention of retaining suppliers in the long term - or due to a lack of in-house expertise . Supplier integration gives the company access to technologies and innovations to achieve competitive advantages (e.g. higher quality, accelerated development and more cost-effective production).
The depth of supplier integration depends on the product to be procured and ranges from involvement in idea generation and concept development to involvement in research and development and joint prototype construction.
Of course, the flip side of such integration must also be considered strategically: Possible risks such as greater dependence on the supplier and the loss of know-how must be weighed up here.
