Efficient supplier management for successful logistics
Why freight exchanges are an important part of supplier management
Why is supplier management important? In today's globalised and fast-moving business world, the answer to this question is obvious. Delivery bottlenecks, rising transport costs and unpredictable market conditions demand flexible and reliable solutions. Supplier management is the underpinning of a stable and responsive supply chain for manufacturing and trading companies.
In this article, we will explain how well-structured Supplier Relationship Management (SRM) enables companies to
- optimise relationships with suppliers
- lower costs
- ensure high quality
We will also explain the critical tasks that freight exchanges perform in the supplier management process in order to further fortify the supply chain.
No traffic jams, no delivery bottlenecks and no shortage of hauliers. We offer balanced loading capacities and a transparent logistics process that gets goods to their destination safely and without delays. As things stand today, the idea of ‘a world without logistical challenges’ seems a long way off. But for TIMOCOM, this is a vision that we are working on every day.
What is supplier management (definition)?
Supplier management systems organise relationships with suppliers from within companies. This includes everything related to optimising cooperation with suppliers, reducing risks, improving quality and monitoring costs.
The aims of supplier management are as follows:
- Quality assurance of the products and services according to standardised criteria
- Reliability for the prevention of production interruptions
- Cost efficiency in terms of procurement costs and performance of suppliers
- Risk mitigation through the prevention of supplier dependency
- Flexibility of the supply chain to be able to react to changes
There is a clear difference between strategic and operational supplier management. The strategic area emphasises long-term planning with regard to the corporate goals, while the operational area is responsible for the day-to-day business and ensuring that everything runs smoothly.
Key aspects of strategic supplier management:
- Choosing a supplier
- Supplier assessment
- Risk, contract and cost management
- Strategic demand planning and market analysis
Key aspects of operational supplier management:
- Order processing
- Supplier communication
- Delivery monitoring
- Invoice and payment processing
- Inventory management
- Logistics coordination
What is a supplier?
Suppliers in the context of supplier management are companies whose performance impacts the customer’s supply chain. They provide goods, services and other resources needed for production or for the rendering of services. They impact quality, costs and efficiency.
Possible suppliers include, for example, raw material suppliers (e.g. metal), component suppliers (e.g. parts), finished goods suppliers or service providers (e.g. transport services).
Challenges in the supplier management process
Supplier management is an interdisciplinary process. Various departments in the company have to work together and use their expertise to build a reliable and efficient supplier relationship. The departments responsible include purchasing (e.g. choosing a supplier, contracts), quality management (e.g. supplier audits), logistics (e.g. transport management, inventory control), finance (e.g. invoice auditing) or IT (e.g. system implementations).
So there are many challenges in the supplier management process:
Supply chain complexity: Supplier management is complex and time-consuming. Everything has to be coordinated. Failure to do so can result in high warehousing costs or even production stops. Different processes and communication channels present obstacles to supplier cooperation.
Controlling costs: Companies have to strike a balance between cost efficiency and quality. To put it simply: The price-performance ratio has to be right. Low-cost suppliers may seem tempting at first, but inferior products or delays can result in an unpleasant wake-up call. For this reason, it is important to always take into account the total costs and not just look at the short-term purchase prices.
Transparency: A lack of transparency in the supply chain can result in significant problems when it comes to tracking and evaluating suppliers. Informed decisions can only be made when enough information is available. It’s also more difficult to recognise risks in a timely manner.
Flexibility: Short-term changes in supply and demand or other unpredictable events such as natural disasters can disrupt entire supply chains. This is why it is important to have alternative suppliers available and to be able to adjust the supplied quantity. Secondly, companies have to establish a structure where decisions can be made quickly and efficiently.
How do I implement supplier management?
Overall, it is important to proceed in a structured manner and to get all stakeholders on board early on. The most important steps are:
1. Needs assessment and objective setting
What specific needs and problems need to be solved?
What measurable goals (e.g. cost reduction, quality improvement) should be achieved?
2. Forming a project team
Which departments should be represented in the project team?
Which roles are necessary?
3. Analysis of current supply chain
What are the strengths and weaknesses of the supply chain?
How is the current performance of suppliers evaluated?
4. Supplier selection and evaluation
What criteria are decisive for the selection and evaluation of our suppliers?
What is the selection process for new suppliers?
5. Implementation of tools
Which SRM system meets the existing requirements?
How is it integrated into an existing ERP system?
Are there other tools that make supplier management more efficient?
6. Process design and optimisation
Which processes need to be defined?
How are bottlenecks and inefficient processes identified?
7. Risk management
What are the risks in the supply chain and how can possible impacts be assessed?
Do emergency plans need to be drawn up?
Are there ways to mitigate risk?
Tools for the process: Make supplier relationship management efficient
Various tools can be used to overcome the wide range of challenges. One selection:
Supplier Relationship Management (SRM) software:
Managing and optimising relationships with suppliers
Enterprise Resource Planning (ERP) system:
Integration and management of all business processes in a central system
Transport Management Systems (TMS):
Planning, execution and optimisation of goods movement
E-Procurement platforms:
Automation and management of the procurement process
Open freight exchange:
Mediation of transport orders between shippers and transport companies
Closed freight exchange:
Arranging transport orders to a specially selected group of trusted transport companies
Data analytics and business intelligence (BI) tools:
Analysis and interpretation of large amounts of data to support decisions
Quality Management Systems (QMS):
Ensuring the quality of products and processes
The tools help to reduce supply chain complexity, control costs, increase transparency and improve the flexibility and adaptability of supplier relationships. You can find helpful tips in our article: How to find the right TMS or ERP system.
The role of a freight exchange in supplier management
Freight exchanges play a crucial role in supplier management. Especially in the area of logistics and transport. As digital marketplaces, they bring companies from production and trade together with transport companies. Marketplaces such as the TIMOCOM Road Freight Marketplace help to overcome the challenges of supplier management.
Freight exchanges reduce this complexity by providing a central platform for the quick and efficient award of transport orders, which simplifies administration and harmonises processes. They also enable transparent pricing and competitive transport solutions that help optimise overall costs through more reliable deliveries.
In addition, the transport network of a freight exchange provides a lot of important information about transport service providers to improve transparency. The processes are further optimised through integrated technologies, such as live shipment tracking or interfaces to the ERP system.
The spot market is mostly known for its flexibility. Freight exchanges offer quick access to various transport providers, facilitate switching to alternative suppliers and support the adjustment of delivery quantities. Closed freight exchanges offer additional security, simplified communication and fast decision-making within a trusted network.
Supplier management as the foundation for a strong supply chain
Supplier management is essential in today's globalised and dynamic business world. It forms the foundation for a stable and responsive supply chain that avoids delivery bottlenecks, optimises transportation costs and copes with unpredictable market conditions.
Well-structured supplier management optimises supplier relationships, reduces costs and ensures high quality. Freight exchanges play an essential role in this by reducing complexity, increasing transparency, improving cost control and providing flexibility.
