A discipline that verifies the stability and potential exposure associated with each supplier, client-relationship management is a business cornerstone used to increase value and control risk. It is integral in maintaining a business relationship, maximizing profitability and identifying customers critical for business growth.
While client-relationship management is generally managed by one department, supplier relationship management can be shared across several, making maintaining it more complex. For example, the legal department may handle contracts management, document storage, supplier onboarding and finalization of terms and conditions, while billing is managed by accounts payable.
The decentralization of supplier management lessens control, splintering responsibility for account ownership, which makes supplier maintenance operational, involving the exchange of information as opposed to being regarded as a growth strategy. Then instead of selecting an automated solution, many companies manually handle the collection, collation and confirmation of documentation through email. Although documentation might be stored virtually, system connectivity can be an issue, and human intervention might be required for the reconciliation and validation of accurate information.
This process can be a nightmare for small, diverse companies. By extending the intimacy of client-relationship management to supplier management and adding process optimization for managing diverse suppliers, creates business value for both parties.
The Supplier Life Cycle
The fundamental reason for supplier diversity is increasing engagement with diverse suppliers. This is simple in concept. But validation of diverse suppliers isn’t always easy and often falls on third parties and the use of their databases, occurring only during a data scrub — an annual analysis of accounts payable information. An imperfect, cold process at its best.
After-the-fact validation is generally more costly and less accurate than internally collecting and managing supplier information. The issue companies faced is that maintaining supplier information falls into a no man’s land, a zone that no one owns, and is therefore unfunded.
Let’s deconstruct the supplier life cycle with an eye towards supplier diversity. Supplier diversity begins with a bid opportunity and the identification of qualified diverse candidates. As part of qualifying to bid, suppliers furnish documentation, information that feeds the supplier evaluation process. When a supplier wins the bid, they begin the on-boarding process, in which they again provide information and documentation.
Although the documentation confirming their diversity status was collected and evaluated to satisfy the bid requirements, these vital documents may not make it into the supplier’s profile, their permanent record. This is a result of multiple handoffs, with each department focusing only on their piece of information. Because diverse suppliers make up such a small segment, they can fall off the radar, or the unique need of recording their diversity status may be forgotten. The supplier diversity lead begins the process, leaving diverse suppliers to navigate the internal red tape of vendor set-up alone.
Understand the Business Value
Once your supplier diversity lead identifies diverse suppliers that compliment your business, these suppliers should be nurtured and positioned for future opportunities. In other words, they need to be “known.” Although they might already be Tier-1 suppliers, with active relationship management, the size of their engagement can grow. Based on their performance, you can even make referrals to other companies.
Diverse suppliers provide a business value; they were selected because they are the best at what they do. Some companies seem to forget the business value of diverse suppliers because (1) it is difficult to measure and (2) the value emerges over time and only when you are tracking it, which few practitioners do.
Own Your Diverse Supplier Data
Reduce handoffs and streamline information-gathering by developing seamless supplier on-boarding and information management. Ongoing reporting requires internal collaboration. Begin by identifying stakeholders and gather a comprehensive list of pertinent documents and data. Share the information internally — remembering to revalidate this periodically. Allow fields for annotation of conversations and validation by information owners. This creates transparency, eliminates unprofessional handoffs, and charts the supplier’s history with your company.
By knowing your diverse suppliers, you have access to real-time, accurate supplier data and accountability for records maintenance. Focus on getting to know and to grow a few high-potential diverse suppliers. This can be an opportunity to position Tier-1 diverse suppliers for growth.
Supplier familiarity and intimacy come from shared accountability, through conversations and information sharing. The key is to start at the very beginning, collect and store relevant data, thus allowing you to focus on driving results.