When “Good” Supplier Management is Rare - Why Most Firms Are Still Vulnerable

You don’t get supplier resilience from systems. You get it from how fully you embed supplier excellence into your operations—and most firms haven’t yet.

There's a gap growing between what companies talk about in terms of supplier management and what they actually do. While there is widespread acknowledgment that formal supplier relationship programs, strong performance oversight, and risk mitigation are essential, many organizations have still not crossed into the realm of robust, consistent practice.

A recent report from S&P Global’s “State of Technology in Supplier Management” found that many core supplier management functions remain poorly supported by dedicated tools. Risk management is managed by only about 33% of companies via formal systems; innovation management only ~7%; contract management is somewhat higher at ~64%. S&P Global

Why Most Supplier Management Is Still Weak

Here are some of the underlying causes that most articles gloss over, but which matter deeply:

• Fragmentation of purpose & ownership
  Many organizations split supplier-related responsibilities across teams: procurement handles sourcing, finance handles payments, compliance functions handle risk, operations handles delivery. No one owns the endtoend supplier lifecycle, so gaps proliferate — especially in areas like innovation, sustainability, or earlywarning risk signals.
• Low adoption of technology solutions
  Even when firms buy software, use is often partial. The S&P Global study shows that a lot of supplier performance evaluation, CSR/sustainability tracking, innovation collaboration are still handled in spreadsheets or generic tools, not in dedicated platforms. S&P Global

This means that even though a company might have a “supplier management system,” core parts of the lifecycle are unmanaged or managed in inefficient ways.

• Miscalibrated metrics & incentives
  Many supplier metrics focus only on cost, delivery timeliness, compliance. But innovative value from suppliers (say, new product ideas, process improvements, shared R&D, sustainability) isn’t measured or rewarded. Suppliers often have low incentive to go beyond the minimum unless encouraged by contract structure, performance scorecards, or partnership models.
• Risk & compliance blind spots
  With supply chains stretching globally, risk factors multiply: geopolitical, environmental, labor, regulatory. If you don’t have uptodate data on subtier suppliers, safety or regulatory compliance, or sustainability, you can be caught flat footed. These blind spots often don’t show up until a disruption occurs.
• Resource & culture constraints
  Senior leadership often funds technology, but not enough investment goes into changemanagement, training, governance, or supplier enablement. In some industries or geographies, suppliers also resist transparency or collaboration. Culture, in both buyer and supplier organisations, has to shift to make “partner” behaviors possible.

Why It Matters: Hidden Costs

When supplier management is weak, the costs aren’t always obvious — but they add up:

• Disruption costs: If key suppliers fail, or regulations change, or quality dips, the result can be expensive recall, delay, or even reputational damage. These costs can dwarf the savings from tight price negotiation.
• Missed innovation: Suppliers often have insights into materials, processes, new technologies. If you don't treat them as partners, you lose competitive edge, new product ideas, or supply chain efficiencies.
• Regulatory and sustainability risk: Consumers, investors, regulators are increasingly focused on ESG and supply chain traceability. Firms that lack visibility into supplier behavior or sustainability metrics will face fines, lost customers, or costly retrofits.
• Operational inefficiency: More manual work, more rework, more miscommunication. If performance data is scattered across spreadsheets, contracts are inconsistent, supplier onboarding is slow—these inefficiencies drag time and increase cost.
• Poor agility: In a crisis—or when a new opportunity arises—companies with weak supplier management are slow to respond. That can mean losing out.

Deep Dive: What Best Practice Looks Like

To close the gap, here are practices that define “supplier management leadership”:

• Endtoend governance model: One function or leadership role owns the full supplier lifecycle: onboarding, performance, risk/sustainability, renewal or exit. This avoids downward handoffs and unclear accountability.
• Datadriven measurement beyond cost/delivery: Include supplier innovation metrics, risk scores, ESG performance, partner feedback. Use dashboards that show realtime or nearrealtime performance — not quarterly snapshots.
• Digital enablement for transparency and speed: Dedicated platforms for supplier master data (accurate, uptodate), collaboration tools (so suppliers can see performance, feedback, changerequests), and risk monitoring of subtiers. Also, regular audits or surveys of supplier satisfaction.
• Incentives for supplier behavior: For example, “supplier of choice” programmes, early payment discounts, shared investment in sustainability or innovation. Treat suppliers not merely as transactional vendors but as strategic partners.
• Continuous improvement loops: After every supplier review, identify gaps, then feed those into process or contract updates. Train internal teams and suppliers alike. Adapt based on feedback.

Key Recommendations for Getting from Weak to Strong

Here are concrete steps organizations can take to elevate supplier management:

• Audit the current state
  Map out current supplier functions: who owns them, what tools are used, where gaps exist (innovation, risk, sustainability, performance). Identify the worst friction points (e.g. onboarding delays, poor data).
• Define what “strong” means for your business
  Tailor your supplier management strategy to what matters in your industry: is it speed, quality, risk, sustainability, innovation, or some combination? Not all metrics are equally valuable for all firms.
• Choose tools selectively
  Where possible, adopt systems that integrate supplier master data, performance tracking, risk dashboards, and supplier collaboration — but don’t buy for feature counts; buy for usage and changemanagement readiness.
• Build feedback loops
  Include supplier voice: surveys, performance reviews, collaboration sessions. Use that feedback to adjust contracts, workflows, relationships.
• Governance + accountability
  Senior leadership must sponsor supplier excellence; procurement must partner with legal, compliance, sustainability, operations. Clear roles, responsibilities, and escalation paths.
• Pilot fast, scale smart
  Try improvements (new supplier onboarding, using risk tools, innovation workshops) in one or two categories or geographies. Measure impact. Then scale what works.

Final Thought: Supplier Management Is the Foundation of Resilience & Innovation

Many firms are still treating supplier management as a checkbox—and that leaves them exposed. In contrast, companies that see suppliers as strategic assets, invest in measurement, tech, culture, and continuous improvement, are far better prepared to handle disruption, drive innovation, and deliver sustainable growth.