Sourcing and Supplier Management

Sourcing and supplier management help your organization build reliable supplier relationships. These processes involve identifying and partnering with providers that meet your standards for quality, cost, agility, and peak performance. When done correctly, you’ll easily reduce risks and keep your organization’s supply chain efficient and resilient. Strong providers align with your operational goals and help sustain performance across sites.

What Is Sourcing and Supplier Management?

Technically, supplier sourcing and supplier management are two separate processes, but they are interlinked.

The sourcing process involves identifying, evaluating, and selecting potential suppliers who can provide goods or services that meet specific requirements. It involves market research, issuing requests for proposals (RFPs), negotiating contracts, and ultimately selecting your supplier(s).

By comparison, supplier management covers all ongoing activities after sourcing, such as onboarding, supplier performance monitoring, risk management, audits, and renewals.

Think of sourcing as the “prequel” to supplier management. It’s not the whole process, but you need to complete it to handle every other task involved in supplier management. Clearly, you can’t manage suppliers you don’t have, but good sourcing practices will make management practices simpler down the line. You can simply focus your energy on maintaining peak performance across your facility.

Key Elements of Sourcing and Supplier Management

Supplier selection

Don’t simply go with suppliers based on their low upfront price tag. Consider performance, reliability, and capacity to deliver consistent results from all of their locations to all of your locations. You can check verified reviews and references to get more visibility into this information before making a decision.

Contract negotiation

During supplier contract negotiations, set clear terms that protect your organization and clearly communicate your business goals. Make sure the agreement covers both your financial and operational objectives. However, always leave some room for flexibility in case your needs change during the relationship.

Supplier development

Collaborative relationships will drive better outcomes. So, work with your suppliers to help them improve their processes as a regular part of your supplier relationship management protocols. Doing so can benefit your business in the long run. Investing in their development may enhance product quality and operational efficiency, helping you achieve and maintain peak performance. That can only be good news for your supply chain.

Performance monitoring

Define key performance indicators (KPIs) at the start of your relationship to give yourself visibility into key data that will help you track supplier performance with precision. Seeing where your supplier started and how their performance evolves is a good way to spot trends. Plus, having visibility into these metrics is a great way to identify opportunities to boost efficiency and cost savings.

Benefits of Sourcing and Supplier Management

Lower costs

There’s research-based proof that strategic sourcing can reduce costs by 61%, but not for the reasons you might think. Focusing on finding suppliers that meet your quality standards for goods and services means that you won’t have to waste time and money on corrections. That’s additional funds that can be reinvested directly into your company’s profitability.

Improved product quality

When sourcing is guided by data on each supplier’s past results, you can confidently choose partners who meet your operational standards. Better quality translates to safer, more reliable products, higher customer satisfaction, peak performance, and a stronger brand reputation for you.

Greater supply chain resilience

While some facilities may choose one provider to act as their primary supplier, there are strategic advantages to using multiple suppliers. By sourcing from multiple high-performing providers across regions, you gain the agility to adapt to supply chain disruptions. For instance, if a road closure is blocking a truck from bringing supplies, you can count on another provider that uses a different route to bring what you need.

Enhanced innovation

When you invest in supplier relationship management, providers are more inclined to share insights that improve performance and cost efficiency. Mutually beneficial relationships encourage creative solutions that help enhance your competitive advantage.

Best Practices in Sourcing and Supplier Management

Market analysis & data-driven decisions

Use market intelligence and data analytics to gain visibility into the top-performing providers that align with your goals. Analyze pricing trends, performance data, and risk indicators to make informed decisions as part of your sourcing strategy.

Risk assessment & mitigation

Identify and assess how you can mitigate risks associated with suppliers early in the procurement process. Using that information, develop and implement risk mitigation strategies that address areas like financial instability, regulatory compliance, and geopolitical concerns. Even relatively stable suppliers can encounter unexpected challenges.

Cross-functional collaboration

Involve key stakeholders across departments to align sourcing decisions with broader business objectives. Collaboration between procurement, operations, finance, and any other affected department gives you a more complete view of a supplier’s potential impact.

Ethical & sustainable sourcing

Evaluate suppliers based on ethical standards and sustainability practices if this is important to your company. Incorporate these criteria into your procurement data to encourage your team to choose preferred suppliers that can support your corporate social responsibility initiatives.

Use of eSourcing & SRM software

Leverage eSourcing and integrated supplier relationship management (SRM) systems to simplify complex processes. Automated workflows and integrated performance tracking provide real-time visibility into supplier activity.

ServiceChannel provides the facility management tools you need to source suppliers from a database of over 70,000 contractors, ranked by performance metrics. Once you’ve found your ideal provider, the ServiceChannel platform will also help you maintain strategic partnerships. You can compare supplier behavior across your database and gain real-time insight with our software.