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Why must service providers understand procurement?

The IMM Graduate School | Why must service providers understand procurement?Dr Myles Wakeham and Dr Beverley Waugh

Service providers/suppliers must understand selection processes, evaluation criteria, relationship management that their customer organisations/procurement managers pursue to decide to select them or to decide to reject them!

The main goal of the logistics services and procurement function is to ensure the provision of these services as required! This must support the uninterrupted flow of goods and services in order to supply what is required by the end customer – received on-time and in good quality. The interaction between the procurement/supply function and other organisational functions thus also largely determines the success of the organisation. (Badenhorst-Weiss et al. 2018).

The service providers/suppliers must also be working with their customers/the buyers through collaboration in order to improve cost, quality, delivery and time as well as other performance measures. Collaborations and alliances require a considerable amount of commitment by the purchasing organisation, but this is critical as the suppliers impact final products and customer service!

Supplier relationship management thus focuses on the interaction between the purchasing organisation and the upstream supplier. Purchasing organisations use supplier relationship management to manage their supplier base. Purchasing organisations will stop using poor performing suppliers and develop the remainder of the suppliers to form some sort of collaboration. Most organisations recognise the need for collaboration as a good way to reduce costs, and to improve quality, delivery, and other measures of performance.

Supply management’s responsibility for supplier quality, is increasingly related to important aspects of the relationship with suppliers, and particularly the quality dimension of this relationship! The key account managers, for example of service providers, could support a customer’s supply manager by being more proactively involved in the quality of their organisation’s service provision to them.

Suppliers and buyers must also understand the importance of negotiation strategies and circumstances under which negotiation takes place. It is important to understand negotiation in purchasing transactions, the negotiation process itself, along with tactics used in negotiation. (IMM SCM303, 2018). Suppliers of goods and services would do well to understand these various concepts and aspects and to ensure that they are equally well versed in negotiation strategies, circumstances, subjects, processes and tactics!

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