Supplier Networks — The Ultimate Guide of 2022
Supplier networks are important in the procurement industry to find your preferred supplier. However, what does it really mean, and how does it work?
In this article, we will discuss what supplier networks are. We will discuss its benefits and how you can improve it for your organization.
After this article, you will have an insight into what supplier networks are. This will allow you to use your learnings in your profession that can give value to your organization. So without further ado, let’s unravel the parts of supplier networks.
What is a Supply Network?
A supply network is a cluster of suppliers or vendors that helps an organization in adding value for customers by producing or delivering a product.
It is a virtual platform where suppliers and buyers located anywhere in the world can collaborate together. Supplier networks help organizations to find suppliers that match their requirements and needs.
It gives organizations numerous options from which they can select suppliers according to their preferences such as product, prices, and location. Thus, it reduces costs and increases the profits of organizations.
Usually, organizations like supplier networks due to the following reasons:
- Reduced purchasing cycle times
- Enhanced visibility of order, invoice, and payment status.
- Reduces paper invoice volume and manual processing
- Improved contract terms
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How to improve Supply Network?
1. Outsource activities to Suppliers
An organization can try to shift from an in-house function to a supplier. It makes sense when the organization wants to concentrate on its core competencies or when a function is proven to be difficult to manage. When outsourcing occurs, the number of top-tier suppliers increases.
2. Take in-house activities
The organization may also decide to do the reverse and take back in-house functions. This is more likely to happen if no supplier is able to supply the required level of service.
3. Concentrate with your suppliers
The organization may try to concentrate its processes with a small number of top-tier suppliers. This will enable the organization to deal with only a fewer number of suppliers. This makes sense if the top-tier suppliers are able to meet and surpass the expectation of the organization to them.
Benefits of Supplier Network for Suppliers and Buyers
1. Reduction of manual efforts
The automation of data entry, data transfer, and data processing between parties limits manual effort. It reduces processing time and streamlines the flow of information between parties.
2. Catalog management
A supplier network helps organizations upload catalogs for different sets of customers. The variables include the item specifications, future pricing, and special offers to avoid any confusion.
3. Simplify the sourcing process
The sourcing process is simplified when the organization and the suppliers can respond to sourcing events on an interactive forum.
4. Reduction in paper flows
E-invoicing is one of the advantages of the supplier network. The procurement team and finance team work together to cross-check the items ordered and paid. Due to this, there is a reduction in errors and delays due to paper flows.
5. Contract management
A supplier network allows the organization and suppliers to be aware of their commitments, expectations, and obligations toward each other. This reduces contract violation that starts from miscommunication regarding the contract.
6. Reduced purchasing cycle times
Supplier networks allow parties to build a strong relationship due to the smooth flow of information that results in the timely processing of delivery, orders, invoice, and payments. Thus, it enables the organization to reduce the purchasing time cycle.
7. Up-to-date supplier information
Information of the suppliers must always be updated, Supplier network integrates with supplier management software and allows onboarding of suppliers.
8. Increase visibility and better relationship
The supplier network gives the organization and the suppliers a clear view of order, invoice, and payment status since both parties need to work in collaboration. Thus, it helps the parties to trust each other and establish a stronger relationship.
9. Improve supplier performance management
The Supply network allows suppliers to monitor their performance and development reports. Through this, the suppliers can improve in the areas that seem lacking.
Things to Consider When Employing Supplier Networks
Supplier networks can help you achieve your goals through its benefits. However, if you want to realize all the benefits of accounts payable automation, supplier networks only offer a partial solution.
The following are the points you need to consider when using supplier networks:
- The supply network only addresses the invoices of suppliers who have participated in the program. Thus, leaving all other invoices to be processed manually.
- Asking vendors to pay third parties to submit an invoice may create friction in the supply chain of the organization and may harm supplier relationships.
- Supply networks may require significant internal training time.
Although the supply networks are only a partial solution, it still depends on your needs if you will employ it as it has its own benefits too.
Frequently asked questions
1. What is a supply network?
A supplier network is a virtual platform where suppliers and buyers located anywhere in the world can collaborate together.
2. Do I need one?
This depends on the needs of your company. Nonetheless, it can really help you, especially if you want to reduce your purchasing cycle times.
3. What should I consider when I want to use supply networks?
As it is only a partial solution, you should consider if it will add more value to your organization.
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