What Are Strategic Suppliers?

In the world of procurement management, one thing that’s a given is working with suppliers. One of the most important sourcing and procurement techniques is working with strategic suppliers and ensuring that you have a good relationship and understanding with this supplier base because this has a lot to do with the importance of quality in supply chain management. These supplies are the backbone of your business in many ways.

You may be unfamiliar with the terms or are unsure how to procure strategic suppliers—or you want to learn how strategic suppliers fit in the procurement world.

Read on to learn more about these topics and the use of supply chain management cloud software to help ensure transparency and keep supplier relationships secure.

Sourcing and Procurement Techniques: What Is the Definition of a Strategic Supplier?

Over the years, as you do business in procurement, you’ll work with many suppliers, but your strategic suppliers should account for a considerable amount of your business or be ones that provide critical elements in your manufacturing process.

Depending on the nature of your business and the goods and services you’re looking to acquire, the numbers may vary. Still, generally speaking, strategic suppliers account for approximately 60 to 80 percent of supply. This is true whether you’re working with global sourcing in supply chain management or working more locally. 

A strategic supplier is vital to procurement and the success of your eSourcing capabilities because they are an integral part of a company’s profitability and long-term growth. You may have suppliers you work with occasionally that can be strategic suppliers even if they only supply a $5 part if that part is used in every item you produce. Still, there will be a relatively small group of suppliers you depend upon, and these are your strategic suppliers.

Sourcing and Procurement Techniques: What Makes a Supplier Strategic?

A strategic supplier isn’t just a supplier who offers goods and services at a low rate and on time. It goes much further than that. With sound sourcing and procurement techniques, there are many strategies to identify strategic suppliers, and ensure they remain safe to do business with in the long term. 

As you’re identifying who may be a strategic supplier to you, you have to perform a risk assessment. Perhaps a different supplier comes in at a lower price, but you are unsure of their ability to deliver on time or if their practices might put your firm at risk of some bad PR. Do you opt for the supplier with a slightly higher price who will be on time, or for the lowball supplier who may be less reliable?

As time goes on, these risk assessments will become easier, and identifying who may be a better choice will be more apparent. More often, risk assessments can be automated using a reputable firm like GRMS (www.globalrms.com).

Also, the need to bring more strategic suppliers into the fold will lessen, as you will have a strong group that needs no additions.

Sourcing and Procurement Techniques: What Is Supply Chain Management and Why Is It Important?

The use of strategic suppliers as a sourcing and procurement technique is important to the overall supply chain function because you have stability, reliability, and a stronger partner should you need it. Your group will have goods and services delivered on time, which allows the manufacturing and assembly end of the supply chain to run more seamlessly.

Additionally, when you need innovation, your strong supplier partners are often a great place to find new ad better ideas to streamline procurement and the supply chain.

In modern times, techniques require sourcing and procurement software, and the use of information technology in supply chain management is a must. To maintain transparency and a strong relationship with your strategic suppliers, you need collaborative software that’s intuitive for everyone to use—your team and your suppliers. This way, everyone is on the same page all the time.

eSourcing Software Options and Optimizations

With software, you have options. First, there is sourcing software that you would use primarily only with suppliers (such as eRFX software). Then other software manages the other areas of procurement, such as spend analysis, centralization, compliance, etc. 

Some suites accommodate both. As you’re looking for sourcing and procurement software, be sure to choose the one that best suits your company’s needs. Software that promotes transparency and collaboration is always a good option. 

To learn more about sourcing and procurement software or to request a demo, contact EC Sourcing Group today at 973-936-9672. We want to help you reimagine the way you think about procurement.