Supplier management toolkit and guidance for professionals

This toolkit is for anyone involved in supplier relationship management activities, including people within or outside the procurement function, such as:

• Supplier relationship managers
• Contract managers
• Purchasing officers
• Contract owners
• Supplier contacts
• any other support staff working with suppliers. 

Supplier segmentation

Supplier segmentation helps agencies understand the risks and opportunities presented by supplier relationships. It determines how critically and strategically important the supplier is to the agency.

Conducting supplier segmentation:

• Improves understanding of the risks and opportunities presented by suppliers.
• Informs the engagement strategy for each supplier.
• Identifies suppliers where a more collaborative relationship will benefit both parties.

The benefits of supplier segmentation include:

• Allocates resource, time and effort wisely.
• Take a proactive approach in identifying suppliers that can significantly contribute to the agency’s success.

See the supplier management toolkit and guidance for leader’s toolkit for further information on the supplier segmentation process.

Supplier management toolkit and guidance for leaders

Performance management

The goal of supplier managment is to maximise value in existing contracts and create value beyond the original contract. Achieving this requires effective performance management with a clear understanding of the following:

• Objectives
• Ownership
• Milestones
• Deliverables
• Risks
• Dependencies
• Transparent reporting

A balanced scorecard is a tool that can be used to manage the performance of suppliers and gain a better understanding of the current performance of the relationship.

A typical supplier balanced scorecard will consist of the following elements:

• Relationship health – the latest formal 360° relationship assessment result plus any interim feedback.
• Contract and performance – aggregated performance metrics
• Strategic risk – current risk profile
• Value creation – summary of financial and non-financial supplier relationship managment benefits
• Joint business plan status – summary of supplier relationship managment work stream performance and progress

Learn more about managing performance during delivery

Supplier meetings

Meetings to discuss performance should be established throughout the life cycle of the supplier relationship. Meetings can be operationally focused on day-to-day activities or relationship focused on continuous improvement initiatives. These meetings offer opportunities to review a broad range of supplier engagements including the delivery of SRM work streams, review Key Performance Indicators and discuss contractual performance.

By implementing a regular cycle of supplier meetings which address both short and long-term organisational needs, the full value of SRM can be realised.

The supplier meeting plan should be used as a guide for how supplier meetings should take place.

Capturing and measuring value

Value creation can take the form of both financial benefit and capability improvements. Value creation can be documented through case studies in a consistent and transparent manner.

Monitor and improve

Successful supplier management delivery requires ongoing monitoring and improvement of performance. This includes:

• Ensuring products and services are provided to the agency, as set out in the contract.
• Identifying and responding to early signs of non-performance.
• Understanding the causes of defects or decreases in service and taking steps to correct.
• Products or services are simplified with improved control, reduced risk and improved value.
• Innovation opportunities taken through collaboration, joint objectives and supplier expertise.

Service improvement plans

Service improvement plans (SIP) respond to a downward trend or significant failure in service. A SIP will be initiated when an operational issue is not resolved and is escalated to the relationship management level.

Learn more about conducting reviews

Innovation

Successful innovation requires a high level of organisational maturity and carries significant potential for improvement.

There are two approaches to innovation:

• Open innovation – Actively seeks ideas for improvement without providing an innovation brief for suppliers.
• Guided innovation – Relationship management provides the supplier with a focussed ‘innovation brief’, which helps guide ideas for improvement.

Open innovation can be more costly and time-consuming than guided innovation, but it can lead to breakthrough opportunities.

The innovation identification and tracking tool provides guidance for stakeholders to assess innovation ideas and provide recommendations.