What's the Difference Between Supplier Collaboration and Supplier Management?

By Laura Foti

What’s the Difference Between Supplier Collaboration and Supplier Management?

  • May 12, 2021

What’s the Difference Between Supplier Collaboration and Supplier Management?

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Laura Foti PhotoIt’s no secret that supply chain complexity has increased. 

Thanks to an explosion of product customization and innovation, an insane volume of data passes through the supply chain every day. Not to mention we live in a “next-day delivery” world, putting the pressure on companies to be fast and lean within their supply chains. 

But when speed-to-market is paramount, there’s no time to make mistakes – everyone must be on the same page. But how?

The key to a lean, mean, supply chain machine is supplier communication.

The caveat is that we’ve outgrown the solutions on the market designed to facilitate supplier relationships. No longer do we look at our suppliers as simply an entity to manage, but one to collaborate with – leaving companies scrambling to find a better way. 

But why does this matter? And what’s the difference between supplier management and supplier collaboration

Let’s take a look.

Supplier Management vs. Supplier Collaboration

Before the e-commerce era (when supply chains were a bit more linear), supply chain relations were more predictable. Think: regular orders, fewer products, less large-scale supply chain disruptions.

As complexity increased, businesses began to add more suppliers into the mix, creating a need for supply chain management. But now, the world demands more of the modern supply chain – leading the industry to a more collaborative approach.

Here’s the difference.

What is Supplier Management? 

Supplier management typically has more of a vertical, or “top-down,” business structure. This means the hiring company makes decisions that are then passed on to the supplier to carry out, while the hiring company provides oversight. The company provides the ‘what’ and the suppliers provide the ‘how’ behind product sourcing or manufacturing.

Supplier management also provides the principles of which we see SRM (Supplier Relationship Management) software built upon.

SRMs are process-focused; key features include:

  • Invoices
  • Order histories
  • Scheduling
  • Contract management
  • Catalog management

While these features are critical for administrative oversight, they are more transactional in nature. Given the complexity of today’s supply chains, most companies need a solution that can drive a more strategic relationship.

What is Supplier Collaboration?

Supplier collaboration has more of a horizontal business structure. Rather than being just the method behind the madness, suppliers function as an extension of the business.

But what does that mean?

It means that the decision-making hierarchy is flatter, the relationship is more of a win-win (not just in financial terms), and each party leverages the other’s talents.

Supplier collaboration results in deeper relationships between supplier and company; gone are the days of suppliers just functioning as a means to an end. Suppliers and companies live in an ecosystem, in which they both must collaborate to increase profitability, speed-to-market, and lower costs.

Using a Spec-First Approach to Drive Supplier Collaboration

So how can you start to move from a transactional, metrics-based approach (supplier management) to a more strategic, collaborative relationship with your supply base, especially as the number of suppliers you manage grows? 

The answer requires us to look at the biggest pain point between suppliers and brands: data management and sharing. 

The reason for a “top-down” mentality is often due to challenges that result from poor specification management. 

Specifications define how something is made or how it should operate. In essence, the specification is the agreed upon contract of what a brand or customer is expecting and what a supplier will produce or supply (hence the term “to spec”).

Today, procurement teams, product development teams, quality teams and packaging teams are often managing specs in data silos like spreadsheets, shared drives and legacy systems. 

Then, when products and packaging are ready to be produced, specs are often shared via email, as a result, are immediately outdated. This presents high risk across the supplier base, because incorrect items may be produced as specs change. And the reason for spec changes abound: changing regulations, consumer demand for transparency, and supply chain challenges can all result in specs changing throughout a product’s life. 

That’s why many companies are turning to Specification Management software to better manage supplier relationship management. A spec-first approach makes it easy to get the core data right – the spec – and easily layer on additional information like pricing, supplier data, documents, and purchase orders. 

Taking a data-driven approach also enables the rapid development of supplier scorecards, more advanced srm strategy, and procurement process optimization by breaking down data silos across an organization. 

Why It Matters: Supplier Performance

2020 is the perfect example of why supplier collaboration matters. 

Nearly overnight, key industries experienced major shortages, companies overworked or, in some cases, lost their suppliers, and supply chain professionals were scrambling to pick up the pieces. Others were struggling to create contingency plans and fell short because they relied too heavily on suppliers to manage critical parts of their supply chain. 

In today’s world, the supply chain must be flexible, resilient, and quickly scalable. COVID-19 taught us that currently, very few supply chains are able to respond to disruptions in real-time. 

There needs to be enough visibility into supply chain operations that companies can immediately respond to changing consumer demands and preferences. Visibility reduces errors, helps companies identify cost savings, find new suppliers when needed, and optimizes procurement.

Supply chain collaboration is a strategic competitive advantage. It’s critical to remove the black box surrounding supplier activity. Our systems should provide a deeper look into key suppliers, beyond invoicing, pricing, and service-level agreements. 

And at the end of the day, supplier collaboration results in mutually beneficial relationships. The more visibility you have into your suppliers’ activity, the better they can serve your business (not to mention, the better impact on your bottom line).

Get Started with Specright’s Specification Management Platform

At Specright, we created the first purpose-built platform for Specification Management, enabling brands and suppliers to share and collaborate on critical data like raw materials, formulas, ingredients packaging and products in real-time. 

Specright’s Specification Management gives buyers and vendors alike an abundance of opportunities to create a win-win situation. 

By centralizing data in a single source of truth and then layering on workflows, vendors can earn buyers’ trust by increasing visibility into sustainability, product sourcing, and logistics. 

Likewise, buyers can use their data to continue meeting consumer needs, predicting spikes in demand, and simplifying every product’s journey to market.

 Download our ebook today to learn more about how Specright is creating stronger supplier relationships and driving collaboration.