What is supplier management?

Processes for identifying, qualifying, onboarding, transacting and collaborating with suppliers and trading partners

How does supplier management work?

Today’s supply chains constitute a large, complex ecosystem of suppliers and trading partners, each of them adding value as they deliver goods and services to the marketplace. Global enterprises often rely on tens of thousands or even hundreds of thousands of suppliers. Companies implement a supplier relationship management process to manage this vast array of partnerships. Supplier management is the collection of processes that enables a company to identify, qualify, onboard, transact and collaborate with the right suppliers for their business.


Why is supplier management important?

For companies in the product-delivery business, success depends on the ability to acquire, retain and effectively work with suppliers to meet customer expectations for quality products — delivered on time and in full. As much as 50% of a company’s value can depend on its supplier relationship (PDF, 1.5 MB) strength.

But as supply chains have become global networks of networks, supplier management processes have grown increasingly complex, time-consuming and costly. A strong dependence on manual, paper-based processes, as well as double entry of digital events and form filling has exacerbated these challenges — slowing execution, enabling human error and hindering agility.

These difficulties are greatly compounded by turbulent times. Recent events have spotlighted the critical importance of the ongoing relationships between a company and its partnerships and suppliers, and how essential those relationships are to maintaining agility and resiliency within supply chains.

Supply chain leaders have responded to these challenges by increasing their commitment to digitizing and modernizing supplier management processes. The numerous benefits include enhanced supplier verification, improved onboarding and stronger lifecycle tracking. Result: more effective supply chain relationship management.


Benefits of effective supplier management

Increase supply chain agility

Respond faster to unexpected marketplace events, new business needs and emerging strategic alliances with the ability to quickly identify, qualify, onboard and manage new suppliers.

Achieve cost savings

Drive new levels of efficiency and productivity — and reduce costs — by enabling frictionless supplier connectivity and collaboration.

Reduce supply chain risk

Mitigate risk — even in times of crisis — by eliminating transaction blind spots and enabling multi-party visibility to minimize vendor disputes.


Key features of effective supplier management

Supplier collaboration

The digital transactions and human interactions exchanged between an enterprise buyer and one or more suppliers as they jointly work to deliver the raw materials, parts or supplies used to produce a finished product for end customers.

Supplier onboarding

Supplier relationship management processes associated with discovering and validating suppliers, becoming interconnected with those suppliers, providing connectivity with relevant enterprise systems and enabling B2B transactions.

Supplier relationship management

Procurement and supply chain activities related to building mutually-beneficial relationships with suppliers, including managing interactions with third-party companies and developing strategies for various types of supplier relationships (for example, an “arms length relationship”).

Supplier lifecycle management

Most supplier management activities, including selecting and hiring suppliers, onboarding those suppliers, managing and enforcing contracts, administering payments, handling terminations, and more.

Supplier information management

The process of collecting, maintaining and applying data related to a business’s suppliers, based on extensive communication received from those suppliers.


What’s the future of supplier management?

The future of supplier management is a fully digital experience delivered through multi-enterprise supply chain business networks, direct connections with strategic suppliers, and purpose-built blockchains for complex supply chain processes.

Supplier management will continue to build on digitization, trust, transparency and intelligence to improve data quality, ensure information immediacy and optimize processes. It will:

  • Extend even further to include more participants in the B2B transactional processes, enabling carriers to be active participants in resolving delivery disruptions, and certifiers and other partners to more quickly validate the financial and legal status of suppliers. 

  • Deliver widely trusted data accepted by government agencies to reduce audits, simplify B2B and B2G procurement, and ensure compliance with trade and customs regulations. Time saved resolving disputes and completing repetitive paperwork can now be spent more strategically.

  • Become even smarter as AI continues to self-learn and build knowledge over time with more data. Honing the ability to pinpoint recommendations and next-best actions for each unique supply chain and supplier relationship, organizations can then confidently apply AI to extend human capabilities and automatically initiate recovery processes to mitigate impacts to the business and customers.

  • Create new value through new capabilities developed with members of the ecosystem. These capabilities not only deliver strategic and operational performance benefits, but can also be commercialized.

  • Enable deeper visibility into further upstream suppliers to identify ways to optimize supply chain operations and manage during times of change. Today, an estimated 40% of supply chain disruptions occur among Tier 2 to Tier 10 suppliers, yet most supply chain professionals collaborate primarily with only their Tier 1 suppliers.

Supplier management case studies

Home Depot

Retailer Home Depot uses blockchain to provide real-time, multi-party visibility into shipping and receiving processes, reducing vendor disputes and strengthening supplier relationships.

Southwire

Southwire relies on a global business network to expand its network of local freight partners, process invoices 40% faster and strengthen supplier relationships.

Li & Fung

Supply chain company Li & Fung Limited integrates with 15,000 suppliers and thousands of customers on a single platform in order to handle transaction peaks of 1.5 million per hour on China’s Singles’ Day.


Related solutions

Supply Chain Collaboration

Find out why 800,000 trading partners trust IBM for partner network connectivity.

Supplier management

Discover how a cross-industry source of supplier information accelerates supplier onboarding and lifecycle management.

End-to-end transaction visibility

Illuminate B2B transaction blind spots with AI and blockchain to get real-time shared visibility, from order through delivery.