Supplier Management

Increase supply chain sustainability, deliver more value and generate innovation through effective supplier management.

The strategic art of driving value through effective supplier management

Supplier management (SM) is the art of driving value through effective supplier governance. SM is uniquely positioned in the supplier lifecycle to generate returns across both direct and indirect spend areas. Many procurement organizations have developed category management and sourcing capabilities that lead to realizable value at the time of contract. As they transition to the post-contract phase, effective SM benefits several main areas:

Achieving customer of choice: Beyond contract value, our experience shows that businesses can gain up to 3% (1) in additional value by improving their supplier management program. Formalized SM framework helps businesses become a “Customer of Choice” of suppliers, leading to competitive pricing access (“favored nation”), top supplier talent, service, volume discounts, supplier thought leadership and lower labor rates.
Increased compliance savings and value realization: Many companies today spend more on Suppliers than on payroll and real estate costs – the right SM framework helps ensure value realization. Businesses often see contractual savings leakages of up to 15% (2) from friction factors such as supplier non-performance, invoice and credit memo errors, and redundancies. Through a structured SM framework, they can further enhance value by not only focusing on “cost” but also “value beyond cost”.
Generates innovation: Supplier innovation impacts the entire company and improves revenue while reducing costs. An established SM program focuses resources on key strategic suppliers to brainstorm, crowdsource, and innovate new ideas.
Driving sustainability and diversity in the supply chain: A strong SM framework encourages evaluating, identifying, and aligning your suppliers toward your ESG objectives. It also helps with initiatives around supplier diversity and reporting.
Heightened risk management: A well-defined procurement governance process aligned to your business needs to solve today’s challenges will help to mitigate risks and address the changes to come.

Footnotes

1 & 2 Source: World Commerce & Contracting and SirionLabs. Faster contracts. Better contracts. Eliminating the friction points in contracting; January 2021, page 8.

How KPMG can help

KPMG has developed leading practice technology and tools to fast-track companies on their supplier management transformation journey. Our services and professionals can help you establish an effective supplier management organization that delivers value to business in the following ways:

Provide client leadership with strategic insights and paths for executive alignment around SM
Assess your current SM capabilities within one group or across the enterprise
Provide leading practice views and gap assessments around all aspects of SM: Contract Reviews; Metrics; Governance Models; Personnel; Processes; Technologies; and Reporting
Develop roadmaps and value cases, including plans to achieve
Help develop SM skills across the client enterprise, create organizational models, and implement target state
Perform SM as a Managed Service for client organizations

Contract analyses and business insights are available to this client on demand through our secure, user-friendly portal. Return on investment in the first year of service was 400 percent.

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