Every good organization strives to deliver goods and services that meet or exceed their customers’ expectations. Whether your company buys raw materials, subassemblies, or finished goods; you know that the quality and consistency of those inputs is a key determining factor in the quality of your outputs. This applies to services as well. If you are subcontracting work, – or even if you are relying upon third-party service providers such as technology companies, billing agencies, or other administrative services, – the quality of the work provided to you has an impact on your overall effectiveness as a business.
Large organizations are aware of this. Both in private industry and the public sector, these organizations are increasingly focused on ensuring that both upstream and downstream trading partners meet their standards for quality, security, and social responsibility. Regardless of where you play in the overall value chain, it’s highly likely that you’re seeing increased attention paid to such issues, – which may be prompting you to establish and enforce standards for your own suppliers. That includes documenting those standards, confirming vendors’ current certification status, and making that information accessible to your downstream trading partners.
Supplier management software provides a structured system for qualifying, selecting, and monitoring your suppliers, supply chain partners, and third-party service vendors. Regardless of whether your evaluation criteria are coming from big box retailers or federal agencies, – it’s likely that there will be some variation in requirements from one organization to the next. It’s also likely that those requirements will change on a frequent basis. As technology evolves, for example, security standards must change to keep up. As new standards, methodologies, and procedures are rolled out, – supplier management processes must likewise adapt. A truly effective supplier management system must therefore be built for adaptability, as we will discuss later in this article.
But first, let’s look more closely at the three primary reasons why your company should invest in supplier management software:
Reason #1: In Every Business, Quality Matters
As we have already noted, there’s a very good reason why large companies like Walmart and the Federal government are mandating standards for the companies with whom they do business. First and foremost, it’s about meeting or exceeding customer expectations. When you know that your suppliers have comprehensive quality management processes in place, you can have considerably greater confidence in their ability to meet or exceed your expectations.
If your vendors are certified in some of the widely recognized quality standards, you can rest assured they are doing the right things to manage their processes to achieve optimal results. We’re all familiar with ISO 9001, for example, which provides a framework for determining and documenting quality standards and processes across a broad slab of industries; but there are numerous other standards that help to ensure quality output from specific industry segments such as aerospace and defense (AS 9100, 9110, and 9120), electronics (IEC and USNC/IEC), medical devices (ISO 13485), and many more.
By screening potential suppliers for adherence to these kinds of standards, and by monitoring performance throughout your business relationship with them, your company can ensure that its own quality programs start with the right inputs. In effect, this functions as a kind of head start in your organization’s quality performance.
Reason #2: Compliance Mandates are Increasing
Large organizations exert a tremendous amount of market power. Years ago, most of them caught on to the importance of managing upstream quality standards by requiring their vendors to be certified under ISO 9001 or similar frameworks. Naturally, this began with direct suppliers, – but they soon recognized the value of ensuring that good quality management processes were also being followed at the companies that supplied their suppliers. Hence the idea of imposing compliance mandates all the way up the value chain was born.
These mandates aren’t always just about quality management, though. Aerospace and defense contractors, for example, are being called upon to address cybersecurity concerns by achieving the Cybersecurity Maturity Model Certification (CMMC). For new bids submitted to the US Department of Defense, CMMC is a firm requirement. That applies to all vendors in every tier of the value chain, regardless of company size; so if your customers are supplying products to the USDOD, you’ll need to get the certification, and you’ll need to ensure that your suppliers are certified as well.
To make managing information about that requirement more challenging, there are five distinct levels of certification under CMMC. Furthermore, those standards are likely to evolve rapidly as technology advances, and as the standards are rolled out and feedback is received. In fact, the CMMC framework is still relatively new and is already undergoing an internal review.
CMMC is just one of many cybersecurity standards, and cybersecurity is only one potential area of concern for large organizations. Environmental responsibility, for example, is receiving increased attention, as our concerns over labor practices in countries which have less stringent laws and/or lax enforcement relative to humane working conditions.
All of this amounts to a potentially confusing mix of new mandates, standards, rules, and reporting requirements. A good supplier management system can help you keep track of it all.
Reason #3: Your Suppliers’ Actions Can Negatively Impact Your Business
A third reason to implement a supplier management system at your company is that negative publicity about your suppliers or their products can have an adverse impact on your company. Most people have heard the horror stories about working conditions at Foxconn plants around the world, including factories in China. They’ve also heard that Foxconn is the primary manufacturer of Apple’s iPhones. Although it’s clear that Foxconn is a separate company, the negative publicity has led many consumers to criticize Apple for the problem. After all, as a large, successful, and cash-rich organization, Apple should be in a position to demand better conditions for the workers who manufacture its products.
You don’t need to be a large company like Apple to suffer negative publicity like this, though. Imagine, for example, that you have outsourced customer billing to a third party, and that your service provider is hacked. That results in a security breach that directly affects your customers. You’ll be required to notify them that their information may have been compromised. Ultimately, the blame will fall on your organization. By managing your suppliers and ensuring that they meet cybersecurity standards, you can reduce the likelihood that such an event will occur.
Most companies are already required to conform to multiple externally imposed standards. Whether those come from government, large trading partners, or intermediaries with whom you do business; they are only likely to increase as a push for compliance grows across multiple domains, including quality management, security, environmental impact, and other factors relating to social responsibility.
If your company is not already using a supplier management system, now is the time to get started. It’s especially important to look for software that can adapt quickly and easily to evolving standards, and to apply new ones as they emerge. At Intellect, we focus on extreme configurability, – that is, we design software that can be tailored to fit your unique needs, without requiring outside experts or computer programmers. We make software that virtually anyone can configure, with minimal training. Contact us today to learn how Intellect can help you.
Now that you've learned about the top 3 reasons to invest in supplier management software, learn about "The 5 Benefits of Change Management Software ".