Supplier management: A UK guide to reducing risk and strengthening compliance

Supplier management is the process of selecting, evaluating, monitoring and collaborating with suppliers to reduce risk and ensure compliance. For UK organisations strengthening supplier management helps businesses get ready for audits, improve their performance and achieve responsible purchasing goals. 

This guide outlines the core components and best practices that procurement teams can adopt.
 

What is supplier management?

Supplier management is a tactical approach to overseeing, evaluating and improving relationships with the providers that deliver goods and services to an organisation. It ensures your business partners consistently meet quality standards, delivery expectations and compliance requirements.

Effective supplier management doesn’t just focus on purchasing. It facilitates long-term, collaborative partnerships that drive value, strengthen risk management and improve supply chain resilience.
 

The supplier management process

Supplier management encompasses the entire supplier process, from sourcing and onboarding through to continuous performance monitoring. The steps involved in supplier management are:

1. Identifying and evaluating potential suppliers

2. Conducting due diligence

3. Negotiating clear and favourable contract terms

4. Onboarding new suppliers

5. Monitoring supplier performance

6. Collaborating to improve buyer–supplier relationships

7. Reviewing and renewing or terminating supplier contracts.

This approach enables you to proactively manage your supplier relationships. It treats supplier management as an ongoing process that helps you identify opportunities for cost-saving and innovation and flag potential risks before problems emerge.
 

Why supplier data and performance matter

Accurate supplier data is critical for analysing supplier performance, compliance and capabilities. Without it procurement teams are essentially operating in the dark.

Centralised, accessible data provides the insights necessary to quickly determine which suppliers are delivering value and which pose unacceptable risks. Supplier performance data also supports accurate forecasting and smarter procurement planning. It helps your team predict potential supply chain disruptions, draw on past performance to negotiate better terms and budget more effectively.
 

Links to sourcing and contract management

Supplier management is a core component of sourcing and contract management workflows: 

• The sourcing process identifies and evaluates new suppliers.

• Contract management establishes favourable terms, service level agreements and performance expectations.

• Supplier management measures ongoing performance against expectations and contract terms. It also provides the data needed to guide sourcing decisions and inform contract renewals.

When aligned, these three functions prevent duplicated effort and support smarter, data-driven decision-making.
 

Why supplier management matters

Effective supplier management helps UK organisations reduce costs, minimise supply chain risks and comply with regulatory standards. With the right approach it can be an effective tool for enhancing operational performance and maximising the value of your supplier relationships.
 

Regulatory pressure and audit expectations

UK organisations face growing compliance obligations. Nearly two-thirds of senior procurement professionals surveyed by KPMG say that increased regulatory and socially responsible purchasing (SRP) demands have heavily influenced strategic sourcing decisions in their organisation. Effective supplier management establishes the audit trail and oversight needed to demonstrate SRP practices.
 

Supply chain resilience and continuity

Supplier management processes such as financial health monitoring, alternative supplier identification and contingency planning enable you to act quickly when key suppliers face problems. This strengthens supply chain resilience and safeguards business continuity during potential disruptions.
 

Reducing exposure to risks created by suppliers

Structured supplier management minimises your exposure to risks by establishing clear performance expectations and allowing early intervention. It’s a characteristic of a good risk management strategy protecting you from potential risks such as delivery delays and data breaches. It also covers against reputational damage from unethical practices – for instance, being associated with suppliers illegally dumping waste or using forced labour.
 

The supplier management lifecycle

Managing suppliers isn’t just about sending purchase orders and paying invoices. It’s an ongoing process that requires attention at every stage. Each phase of this lifecycle should include specific objectives, actions and success metrics that support effective supplier relationship management (SRM).
 

Onboarding and due diligence

Before relationships can be nurtured, potential suppliers must be vetted. This involves verifying their credentials, assessing their financial stability and validating regulatory compliance. 

Your supplier onboarding workflow then sets the stage for the entire relationship. Organisations with efficient onboarding processes can shorten supplier activation time by more than 90%. Solutions like Amazon Business help streamline supplier onboarding while ensuring you have complete visibility across each step of the process, from verification of sustainability certifications to integration with supplier catalogues.
 

Performance monitoring

Continuous performance monitoring keeps your suppliers accountable, ensuring they meet contractual obligations and adhere to quality standards.

In a recent Deloitte survey 64% of CPOs cited enabling greater visibility into the supply chain as a top priority. By tracking essential metrics like delivery times, product quality and invoice accuracy you’re better positioned to identify trends and take corrective action early.
 

Scorecards and feedback loops

Supplier scorecards are useful tools for translating performance data into clear ratings. They support decision-making and create transparency that strengthens your supplier relationships.

Establishing feedback loops whereby scorecards are regularly shared and reviewed with your suppliers lets you make the most of performance insights which you can use to improve processes and innovate.
 

Renewal and offboarding

Contract renewals should be informed by a comprehensive analysis of performance history, organisational priorities and market conditions. Your top-performing suppliers may warrant contract extensions, while underperforming suppliers may need to be terminated and replaced.

Offboarding requires careful consideration and planning. How will you safely avoid service disruptions and recover company property? What is the most efficient method for transitioning to alternative suppliers? Before offboarding an underperforming supplier develop a clear strategy for a smooth transition to an alternative source.
 

Supplier performance and KPIs

Through effective KPI monitoring you can identify early warning signs, continuously improve supplier management processes and accurately benchmark performance. Your supplier performance metrics should align with your organisation’s priorities.
 

Quality and fulfilment

Quality and fulfillment metrics assess whether suppliers are reliable, meet expectations and adhere to contract terms. Key metrics to track include:

• Defect rate

• Returns rate

• First-time acceptance rates

• On-time delivery

• Order accuracy

• Average lead times.
   

Cost and value metrics

Cost metrics capture the total value delivered while value metrics pinpoint value that doesn’t appear when comparing supplier prices. It’s still important to monitor pricing per unit but other metrics include:

• Total cost of ownership (delivery costs, inspection expenses and administrative overhead)

• Innovation contributions

• Process improvement suggestions

• Supplier flexibility during demand fluctuations.
   

Risk indicators

Risk indicators allow you to proactively identify operational, financial and compliance threats. They enable you to monitor regulatory violations and adherence to ethical standards ensuring you have full visibility into your supply chain. Key metrics to track include:

• Financial health scores

• Capacity utilisation

• Backup capability

• Compliance and audit pass rates

• Cybersecurity ratings.
   

Best practices for supplier management

To excel at supplier management, you must balance relationship-building with standardisation, flexibility with structure and efficiency with thoroughness. Tight controls and centralised data are essential for accurate performance monitoring and adherence to contract terms.
 

Standardised onboarding

An inconsistent onboarding workflow creates data gaps and compliance risks that can have negative implications for your operations. With a standardised process for onboarding new suppliers you can rest assured that all due diligence checks happen and no critical steps are missed regardless of who manages the process.
 

Policy and compliance controls

Clear policies are your baseline for effective supplier management. They should address expectations surrounding ethics, data security, sustainability standards, diversity initiatives and regulatory requirements. Communicate these policies during onboarding and continuously reinforce them through regular audits.

Implement compliance controls by conducting regular certification reviews and audits. With digital procurement technology you can automate compliance monitoring which reduces manual effort and improves data accuracy.
 

Centralised supplier information

Data siloes lead to blind spots, duplicate work and inefficiencies. When your supplier data is fragmented across multiple locations it’s difficult to respond quickly to challenges and make informed decisions.

Establish a single source of truth for all your supplier data that’s easily accessible to stakeholders. It should contain all supplier contact details, contract terms, performance history, compliance documentation and risk analyses. 

Read about how White Horse Federation consolidated supplier management and achieved total procurement visibility with Amazon Business.
 

Tools that support supplier management

Today’s top-performing companies use sophisticated yet simple-to-use technology like Amazon Business to streamline tasks, ensure accuracy and undertake advanced performance analysis. These tools can transform your supplier management process into a tactical, data-driven function.
 

Supplier portals

Supplier portals are dedicated communication channels for sharing documents, updating orders and processing transactions. They give suppliers the power to update their own information, monitor performance scorecards and send you invoices, minimising the administrative burden for you.
 

Risk scoring

Automated risk scoring solutions monitor news feeds, financial filings, regulatory databases and third-party risk assessments to assess supplier risk across these dimensions. Risk scoring focuses attention on suppliers with higher risk profiles enabling your organisation to efficiently allocate resources with transparency into the various risks and potential disruptions across your entire supplier network.
 

Integration with ERP and procurement data

Supplier management tools perform best when they share information in real time with your procurement and enterprise resource planning (ERP) systems. Through seamless software integrations, you gain holistic insights across supplier relationships and ensure all data is consistent and accurate. This also enables you to cross-reference tail spend with preferred supplier terms to identify instances of off-policy spending.
 

Stronger supplier control

Poor supplier management undermines procurement performance, wasting time and driving up costs for your organisation. A structured approach to supplier lifecycle management helps you reduce your exposure to supply chain risks, build stronger relationships and get the visibility your organisation needs to make smarter decisions.

Done right, effective supplier management delivers benefits across the organisation:

• Finance teams can accurately predict costs and improve budget management

• Operations teams receive better quality goods when they need them with fewer disruptions

• Procurement teams can make smarter decisions based on accurate, real-time supplier performance data.

Solutions like Amazon Business assist with maintaining visibility and consistency across your suppliers, centralising critical data and streamlining procurement workflows. Speak to our friendly team today to discover how Amazon Business can help you strengthen supplier relationships, maximise compliance and align procurement with your organisation’s top priorities.