PURPOSE AND OBJECTIVES
The purpose of supplier management is to manage suppliers and the services they
deliver in order to ensure the organisation gets the best value from each supplier throughout the lifecycle of the relationship with the supplier. Given the complexity of modern IT service, it is common for individual services to be provided through a mix of internal and external suppliers. Supplier management has to manage the complexity of relationships with external suppliers in such a way that they all pull in the same direction and, in doing so, deliver services that underpin the service level targets enshrined in SLAs at a cost that represents best value for the organisation. A key outcome for supplier management is to ensure that
the optimum value is achieved from the relationship with a supplier, and this rarely means squeezing suppliers until they have no more to offer. The purpose of supplier management is also about the longer term. The old confrontational supplier management approaches are hopefully outdated. Supplier management today has to be about building long-term relationships, ideally built around shared risk and reward models, where success in the relationship is a mutual goal.
This does not mean that the relationship between the organisation and its
suppliers is casual. A key purpose of supplier management is to ensure that
effective contracts are in place, ensuring that the supplier delivers according to the terms, conditions and delivery targets contained within the contract. What is understood by an effective contract is crucial. An effective contract is not about driving the price down to a point where the supplier cannot sustain delivery or needs to claw back revenue by holding the organisation to ransom over essential contract variations.