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Supplier Management

Supplier Management

Supply Chains
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Purpose

The purpose of this procedure is to ensure that the company obtains the best possible combination of quality and price from its suppliers.

Background

Comprehensive records will be maintained for all major suppliers.  All suppliers will be subject to periodic review to verify that they provide the best combination of quality and price.

Scope

Applies to the purchasing department.

The [Purchasing Department] is responsible for:

  • Ensuring adequate supplier records are maintained
  • Making judgements and related recommendations about the value and quality of suppliers
  • Maintaining arms-length relationships with all suppliers
  • Periodically assessing the potential for improved purchasing value through the analysis of current and potential suppliers

Definitions

  • “Electronic Supplier Records” means information about all transactions, contacts, and contracts with  suppliers maintained in a database or other electronic format.
  • “Supplier Payment Terms” means specific requirements for payments laid out in the supply contract including timing of invoicing, time to pay and interest charges if payment is delayed.
  • “Supplementary Purchase Order” means a purchase order that relates to or modifies a previously-issued purchase order.

Procedure

Purpose of Supplier Records

  1. Good supplier records track locations, contact names and numbers, payment preferences, contract provisions, purchase order and payment history as well as any quality issues that may have arisen.

  2. Electronic supplier records may be used as an electronic source for the completion of purchase orders and for processing payables.

Purpose of Supplier Management

  1. Periodically, supplier records should be analysed to obtain information on the reliability of each supplier, comparison of prices or discounts provided, or volume of business which may lead to the creation of a purchasing contract providing better prices, discounts or payment arrangements.

  2. Effective supplier management can produce tremendous economies for the company through improved terms, best balance between supplier quality and cost, and improved cash management through strict adherence to payment terms.

Supplier Records – Contents will contain at a minimum:

  • Supplier name and address
  • Contact name(s) and particulars
  • Alternate supplier locations and telephone numbers
  • Related companies if known
  • All outstanding purchase orders including expected fulfilment date
  • Supplementary purchase orders
    • Completed purchase orders for [x] years, organised by year
    • Retired purchase orders and reasons for retiring the purchase order
  • Contract(s) scope and terms
  • Payment information by purchase order
  • Typical invoice payment terms
    • Commentary on reliability and quality of goods

Supplier Management – Process

  1. On a monthly basis purchase orders shall be analysed for suppliers who are consistently overdue on fulfilment and appropriate action shall be taken.

  2. Supplier invoices received shall be checked on receipt against purchase order provisions and scheduled for payment according to supplier payment terms.

  3. Purchasing agents/buying officers must balance the benefits of the give and take of long-term relationships with existing suppliers against the benefits of potentially better quality, pricing or payment terms offered by alternative suppliers. 

Periodically,

  1. Purchase history by supplier shall be analysed for possible economies

  2. Prices, discounts and payment terms shall be compared to those of alternate suppliers

  3. Negotiations shall be undertaken with current or prospective suppliers to obtain better prices, discounts and payment terms

  4. Opportunities for supply contracts offering the best terms shall be identified

  5. Information about preferred suppliers, new suppliers and good deals shall be provided to operating departments to keep them abreast of purchasing opportunities

Supplier Relationships – Ethics

The company expressly forbids its employees, most particularly purchasing agents or buying officers, from accepting any good, service, gift or other personal offering of more than nominal value from its suppliers at any time.