Strategic supplier relationships benefit procure-to-pay and beyond

This is an excerpt of the original article. It was written for the July-August 2017 edition of Supply Chain Management Review. The full article is available to current subscribers.

July-August 2017

A few years ago, a Harvard Business Review cover posed the question: What’s the secret to winning in the global economy? The answer: Talent.

Browse this issue archive.

Already a subscriber? Access full edition now.

Need Help?

Contact customer service

847-559-7581   More options

Not a subscriber? Start your magazine subscription.

When it comes to improving performance, many organizations focus too much on tactical processes for regular activities such as ordering materials. They neglect the front-end steps they can take to benefit these internal processes and help them run as smoothly as possible. This includes improving processes for appraising and developing suppliers. By conducting these processes effectively, an organization can weed out unnecessary, inefficient or ineffective suppliers and foster stronger relationships with suppliers that are beneficial for the organization. The relationships that come out of a strong supplier development program lead to highly efficient procurement efforts both at the tactical and strategic level.

APQC recently looked at its Open Standards Benchmarking data in procurement to determine how practices aimed at evaluating the capabilities of suppliers affected the procure-to-pay process and procurement efforts overall. APQC found that organizations focusing their supplier relationships on more strategic factors and organizations more broadly and more frequently using supplier scorecards have clear advantages in their procurement efforts overall and in their procure-to-pay processes.

Supplier appraisal practices APQC examined several aspects of how organizations evaluate suppliers. First, it looked at the nature of organizations’ relationships with suppliers. As shown in Figure 1, these relationships are focused on a variety of factors. However, the top three factors are quality, total cost and supplier capabilities. Only 14% of responding organizations indicate their supplier relationships are focused primarily on the price of purchased materials. These results indicate that many organizations are looking at the bigger picture when selecting and retaining suppliers.

SC
MR