In recent years, logistics, and by extension, the supply chain, have faced no shortage of challenges. From the onset of the Covid-19 pandemic in 2020 to extreme weather events, the war in Eastern Europe, and high global inflation, the world has dealt with events that disrupted supply chains, requiring the development of new practices to achieve excellence.

In this context, strategic supplier management has taken on a prominent role and remains a trend for the coming years.

To give an idea of the magnitude of the challenges pressing the supply chain, even automotive giants like General Motors were affected, for example, by the shortage of electronic components.

The problem was most severe between 2020 and 2022 when China, the largest producer of such materials, enforced a strict zero-Covid policy, leading to long factory shutdowns and complicating the global electronics supply chain.

From a practical example, we are left with the question: is it truly possible to prepare for the future without knowing the potential crises that may hit our operations?

Here, we’ve put together comprehensive content on how to structure strategic supplier management, keeping your company always one step ahead. Check it out!

What is strategic supplier management?

The concept of supplier management directly relates to finding and maintaining a reliable network of suppliers to keep a business running smoothly. These suppliers can provide the inputs or services that a company needs, either for product production or business infrastructure.

This area is inherently strategic, as suppliers unable to meet the required quantity and quality of deliveries can lead to a company offering low-quality products or even result in operational downtime.

Thus, strategic supplier management goes beyond simply establishing a purchase or service contract. Managing suppliers strategically means fostering the relationship between contractor and contracted party, but it goes beyond that.

Large companies may have a list of suppliers that can reach the hundreds, coming from different parts of the world. Strategic supplier management continuously maps and analyzes possible logistical, environmental, economic, and political disruptions that could affect a supplier, allowing proactive measures to avoid losses and damage.

Additionally, supplier management also aims to monitor the overall condition of service providers, seeking to identify operational health and market movements.

‍A strategy to reduce risks

Ultimately, strategic supplier management aims to reduce operational risks for a company. By strategically analyzing suppliers, a company can select those best prepared to meet business demands, enhancing operations and the brand’s reputation.

Given the importance of strategic supplier management, here are three valuable tips for this area in 2024:

‍1) Governance and risk standards

‍A few years ago, price was one of the most (if not the most) important factors in selecting a supplier. But this reality has changed, as has consumer behavior.

The possibility of shortages, reputational crises, and irreversible financial losses have become issues with the potential to profoundly impact a brand.

Having a well-defined supply governance standard has become imperative for risk reduction. This means that once a protocol or action plan is defined, any deviation from it becomes a threat to the company’s strategy.

Governance becomes a central point of strategy in supplier management, a task that must be rigorously conducted within the established standards.

This can be challenging as it also involves adjustments in organizational culture and gaining buy-in from leadership and various departments within the business—leading us to our next point.

‍2) ESG management

The ESG (Environmental, Social, and Governance) acronym is no longer new and is now a familiar term among corporate management teams. Environmental impact, social responsibility, and governance are words that must be part of any business’s vocabulary, reflecting the radical shift in consumer behavior over the last few decades.

Associating your brand with slave-like labor conditions, environmental destruction, or harm to communities are just a few examples of what a lack of ESG policies can cause a brand.

However, a company’s award-winning ESG policy won’t matter if its suppliers don’t follow the same guidelines. Imagine a food chain supplier has a farm where animals are mistreated before slaughter. The association between the brand and the supplier could have disastrous consequences for reputation and image.

In such cases, companies must use tools that assess their suppliers’ ESG practices, standardizing and automating the risk management process.

3) Resilience

‍One thing is certain: new developments and challenges in the global supply chain will not cease.

Whether due to the global geopolitical landscape, local political, economic, and infrastructure issues, or even climate change, it is crucial for strategic supplier management teams to remain adaptable and prepared to learn.

Innovation will continue to be the key that allows organizations to respond to the disruptions and changes that will keep occurring, requiring course corrections and the development of new solutions. Resilience is a factor that will distinguish organizations that respond well to changing scenarios.

In addition to staying open to technological advancements, such as the revolution brought by artificial intelligence to strategic supplier management, organizations must foster an environment where leaders and employees exchange information and insights on macroeconomic and geopolitical trends, which increasingly directly influence the supply chain, as seen in recent episodes like the pandemic and the war in Eastern Europe.

Having a diversified supplier base can provide a buffer against potential shortages. Additionally, utilizing advanced technologies, such as artificial intelligence, can help teams focus more on strategy and less on bureaucracy, offering greater agility.

‍Keywords for strategic management

‍Supplier management is an activity that deals with a constantly moving world. After all, the supply chain is nothing more than the movement of raw materials, products, and services. What we’ve seen this year is that a few key terms will be trending in this field: governance, sustainability, and technology.

The ability of this sector to adapt amid ongoing challenges will be a central element for companies aiming to excel in strategic supplier management.