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The growing importance of Supplier Management

How many of your managers are responsible for managing external supplier and outsource relationships? How critical are these externally provided services to the effective running and success of your business?

The nature of management has changed in many businesses. Increasingly managers are asked to manage a range of different and often complex relationships. Compare this to "old style" business structures when managers were responsible for the leadership and management of an in-house department. Whilst not an easy task, it was well defined, the parameters were clear. The emergence of more fluid company structures means that now managers can be managing project teams, virtual and remote teams, and partner organisations.

The growth of Outsourcing

One of the biggest trends in recent years has been the growth of outsourcing. At the extreme some businesses have taken the view that if an activity is not part of their core business they will outsource it to an external organisation. This means that I.T. services, facilities management, pensions, call centre, payroll, fleet management and many more have been outsourced.

The result? Managers who have historically managed in-house staff are now responsible for managing an external organisation. In appointing a supplier the company specialists will be involved - purchasing, legal, risk management etc.


All will have a role, with the functional area for establishing the contract, the service level agreement, and defining the key performance indicators. However, managing the contract and the relationship often falls to the line managers in the business.

Supplier management training

Arguably leadership and management are about the same thing - regardless of whether you are managing an in-house team or an independent organisation. But there are differences.

Common Concerns

Frequent concerns and questions raised by people involved in supplier management are:

  • How do I get share of mind? We are not their only customers.
  • How do I make sure that they deliver against the standards that are agreed?
  • What happens if they do not perform against the KPIs? How do I escalate the issue?
  • We do not want to get to the point of waving a piece of paper, shouting "breach of contract"
  • How much time do I need to spend measuring their performance?
  • How do I make supplier reviews an effective forum?
  • How much time do I invest in developing the relationship?
  • Do I want a supplier or a partner relationship?
  • They are critical to our business, who has got the greatest leverage?

These are all real and genuine questions and concerns, particularly if the service being provided is mission critical to your business.

There is a greater level of complexity and often implication in managing an external supplier. For example, if your business needs have changed so the service levels with the supplier need to be amended, this will involve some contract re-negotiation, which may have financial implications. This involves a lot more than setting new objectives and standards with an in-house team.

As important as managing the process, is being able to manage the relationship. A business arrangement based purely on the contract is unlikely to result in the best value for your organisation or the supplier.

Developing line managers to manage external suppliers more effectively

hr TEAM UK has an established track record in helping managers manage external supplier contracts more effectively. Over the last eighteen months we have worked with International banks and manufacturing companies on supplier management. We have worked with managers responsible for managing a range of outsource services from logistics to pensions, transport to critical I.T. services.

For each project we work with the client to ensure that the principles of effective supplier management are set in the context of their business and of the participant job roles.

At a headline level typical topics in such a programme are:

  • Supplier life cycle - this provides an overall framework
  • Supplier selection criteria - this also provides the basis for on-going assessment of the supplier
  • Managing the RFP and ITT process, for managers involved in appointing suppliers as well as managing existing contracts
  • Risk assessment
  • Establishing and working with the service level agreement (SLA)
  • Defining the key performance indicators and how they will be measured
  • Managing supplier review meetings
  • How to develop positive supplier relationships
  • Supplier or partner - defining the objective
  • How to move from a supplier to a partner relationship
  • Managing performance issues and disagreements

Do you believe that developing your manager's skills in managing external suppliers will add value to your business? If so, an initial discussion with us may be the next move.

Each programme we develop is specific to a client, but we can provide you with some example materials which would illustrate typical content.

Example Client Case Study

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