The term "supply management" came into being as a means of referencing strategic sourcing, procurement and other elements of upstream supplier planning – aspects that would later become condensed under the "source" portion of the Supply Chain Operations Reference Model, according to Adams. The idea, he says, was to emphasize "the fact that the focus needs to be on the supplier." Good supplier management is a "reoccurring process flow," which begins with supplier segmentation and circles back to supplier performance. The segmentation exercise is an attempt to identify strategic, "bottleneck," transactional and commodity suppliers, Adams says. As organizations advance in maturity, they should be aligning this process with customer segmentation.
The work of segmentation allows companies to focus their efforts on the most important suppliers. “No organization ever had all the bandwidth to spend time and resources on every relationship,” Adams says. Through segmentation, companies can concentrate on those partners that add the most value to the business.
Adams stresses the importance of specifying key elements of the relationship in the body of the contract. “Everyone should understand what ‘good’ is going to look like,” he says.
The level of monitoring that a company undertakes will depend on the criticality of the supplier in question. Transaction suppliers might be given a self-assessment and minimal report cards. Others judged to be more vital to the organization will be assigned more rigorous criteria and oversight, with five or more weighted attributes.
The focus should be on both people and process, Adams says. Technology is important as well, as means of aligning the various elements that make up an effective supplier-management effort.
