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Written by Marijn Overvest | Reviewed by Sjoerd Goedhart | Fact Checked by Ruud Emonds | Our editorial policy

Supplier Networks — The Ultimate Guide of 2024

Key take-aways

  • Supplier networks are clusters of suppliers or vendors that collaborate to add value to organizations by producing or delivering products.
  • Outsourcing activities to suppliers can be beneficial for organizations looking to concentrate on core competencies or manage challenging functions.
  • Reduction of manual efforts through data automation.

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

How to Improve Supply Network?

If you’re wondering how to improve your supply network then wonder no more! The answer is listed down below.

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

Here are the benefits of supplier network for suppliers and buyers that you should know about!

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, payable outstanding 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.

What is Supplier Network Management?

Supplier network management is the process of managing the activities of suppliers and buyers involved in the same supply chain network. It involves identifying, assessing, selecting, and managing supplier relationships to ensure they meet the company’s requirements. 

Additionally, it helps discover opportunities for buyers and speeds up the procurement cycle which results in the timely selection of goods, delivery, and payment. It gives plenty of options for buyers to select suppliers according to their preferences.

Benefits of Supplier Network Management

Here are some benefits you should know about supplier network management.

1. Automation

The automation of processes between the seller and the buyer limits manual effort, shortens the processing time, and streamlines the flow of information between parties. Additionally, there is a reduction in errors and delays due to automation. 

2. Simplified Sourcing Process

The sourcing process is simplified as suppliers and buyers respond to sourcing events on an interactive forum. They can easily see the event scores through a supplier network. 

3. Contract Management

Supplier network management allows both parties to know their obligations and expectations at all times by keeping a close watch on the terms of their contract. Thus, it greatly reduces contract violations that will help both parties to communicate and easily finish their collaborative project. 

4. Updated Supplier Information

Supplier network management solutions enable the onboarding of potential suppliers in real time. Thus, all the information about the suppliers is up to date. 

5. Visibility and stronger relationships

The fact that both parties need to collaborate, gives them a better vision of the order, invoice, payment, and delivery status. Thus, it helps both parties to trust each other which enables them to build stronger relationships. 

What is Supply Network Collaboration?

Supply network collaboration is the process of two or more organizations collaborating with one another to plan and execute activities across their supply chain network. This may take many forms such as sharing of information, expertise, and resources as well as joint planning. 

A high level of trust, transparency and communication between organizations are needed to have an effective supply network collaboration. By working together, organizations can enhance and streamline their supply chain process, lower costs, and meet customer demands. 

Furthermore, by collaborating with other organizations in their supply chain, businesses can gain a competitive advantage and better position themselves to adapt to the changing demands of the market.

Conclusion

Understanding and improving supplier networks, efficient supplier network management, and fostering collaboration across the supply chain are crucial for organizations. These practices lead to reduced manual efforts, streamlined processes, improved visibility, and stronger relationships.

Embracing supplier networks, management, and collaboration can provide a competitive advantage and better position organizations to adapt to market changes.

Frequentlyasked questions

What is a supply network?

A supplier network is a virtual platform where suppliers and buyers located anywhere in the world can collaborate together.

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.

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.

About the author

My name is Marijn Overvest, I’m the founder of Procurement Tactics. I have a deep passion for procurement, and I’ve upskilled over 200 procurement teams from all over the world. When I’m not working, I love running and cycling.

Marijn Overvest Procurement Tactics