The supplier management has a number of definitions. Some companies believe that it is the management of sellers in order to get better prices and terms. Others believe that supplier management builds a relationship with your suppliers for mutually beneficial interactions.
There is also an increasing prevalence of buyers allowing vendors to manage the procurement process as in Vendor Managed Inventory (VMI) systems, also known as Vendor Management Inventory.
In this procurement process, which is used by many large retailers, the supplier creates interfaces with the buyer's sales and inventory accounts and delivers new products on a "Just in Need" (JIT) basis.
Supplier management involves taking care in selecting a vendor and then performing regular and frequent reviews using detailed assessment methods. During this supplier selection process, a period of supplier analysis is carried out to find the sellers who will supply quality products at affordable prices and on favorable terms.
Each supplier is matched against a number of supplier selection criteria in order to find the most suitable supplier for the purchasing company. Large vendors are often assigned supplier ratings by reputable consulting firms, which greatly aid the process.
The entire purchasing process and multi-vendor management is supported by a range of tools, technologies and services collectively known as Vendor Relationship Management (VRM).
The providers coordinate with their customer's vendor management system, which creates an efficient and profitable purchasing relationship for both companies.
The performance management of providers is usually measured on the basis of Service Level Agreements (SLA) and the alignment with their contractual obligations. Some companies use a balanced scoreboard method. The most commonly measured are relationship, account management, quality, delivery, and cost.
Companies that hire multiple employees, especially temporary workers, can use a Vendor Management System (VMS) to minimize costs and prices and to maximize efficiency. A VMS is an Internet-based application that connects to one or more service providers. Features include a procurement process, consolidated billing, and time sheets.