Supplier Management


Supplier Management ensures that external services and configuration items, which are necessary for the service delivery, are available as requested and as agreed at the service level.

Supplier Management is responsible for consolidating requirements for external services and supplies, scanning the market for providers, negotiating with a chosen supplier, and for the contracting and monitoring of external services and service providers. Management of supplier relationships and supplier performance are additional tasks. Supplier Management is also responsible for establishing and updating the basic supplier framework, which is a Supplier Strategy and Supplier Policies.

Supplier Management is triggered from the Service Portfolio Management whenever a new supplier is necessary.


The purpose of Supplier Management is to plan, manage and review suppliers of IT-services and infrastructure and to monitor the agreed service levels. This objective should be fulfilled by balancing the quality of services against the economic cost.

Supplier Management contributes to an integrated Service Management approach by achieving the following goals:

  • Every supply is provided on defined requirements and service levels.
  • Every supply runs through a set of standardized activities and procedures in order to ensure effective and efficient processing.
  • Every external supplier used, increases the risk to normal service operation due to lower control levels and accessibility. This means that each supplier needs to be carefully assessed and sufficiently tested in order to avoid service disruption or degradation of service quality, in particular in terms of SLA deviations.
  • Every supply decision and performance is documented and reviewed.

Roles & Functions

Supplier Management Specific Roles

Static Process Roles

Supplier Process Owner
Initiator of the process, accountable for defining the process strategic goals and allocating all required process resources. See Continual Process Improvement Management for a detailed description of these activities.
Supplier Process Manager (Supplier Manager)
Manager of the entire process, {responsible en} for its effectiveness and efficiency. Team leader of the function „Supplier Management Team“. See Continual Process Improvement Management for a detailed description of these activities.
Supplier Management Team
Team associated to the Supplier Management Process (as defined by Process Owner or Process Agent).

Dynamic Process Roles

These roles are dynamically created during the Supplier Management Process. See the process-specific or activity-specific rules for details.

Supplier Owner
The attribute in the records contains the value of the Role/Function currently accountable for a supplier (but NOT for the Supplier Management Process). The Supplier Owner can be changed with the help of a Hierarchical Escalation. The content or partner related organization of Supplier depends on the strategic definition in Supply Strategy.
Supplier Agent
The attribute in the records contains the value of the Role/Function currently {responsible en} for the activity or task within an activity of the Supplier. The Supplier Agent can be changed with the help of a Functional Escalation, if permitted by the Rules.
Supplier Advisory Board (SAB)
Consulting body for category 2 and 3 supplies as well as for other categories as defined by the Supplier Strategy. The members of the SAB are defined in the activity „Supplier Strategy“ and recruited from:
  • Service Owner
  • Supplier Process Manager
  • Service Expert or Service Specialist
  • Customer represented by the Requester
  • Other persons necessary
Supplier Authority (SA)
The authority (person or group) authorizing a supplier; Supplier Authorities vary depending on the supplier category. See the Activity Specific Rules in the activity Supplier Classification for details.
Supplier Requester (SR)
This is the person who triggers a supplier via a Request for Supplier (RFS) form. This can be identical with a service or customer specific role.

Service Specific Roles

Roles depending on the affected service are found in the Service Description.

Customer Specific Roles

Roles depending on the affected customer(s) are found in the Service Level Agreement (SLA). The Service Level Agreement for the customer specific roles is maintained by the Service Level Agreement Management.

Customers of the affected Service with a valid SLA

Example: Service Level Agreement Management

Information Artifacts

This section describes information/data required or recorded by the process. Typically, the Supplier Process will contain the following information/data.

A set of basic definition documents and policies:

  • Supplier Strategy
  • Supplier Policy
  • Signature Policy

Supplier, supplied goods or services related documents:

  • Supplier contracts, agreements, terms and conditions
  • SLAs for the Suppliers of certain goods and services
  • Reports on supplier and supplier performance and analysis of these reports (reports to be performed by the Report Management).

Additional documents which support the process:

  • Request for Quotation (RFQ)

Supplier Strategy

Supplier Strategy defines the general rules and conditions for the selection of a supplier of goods and services. Supplier Strategy is aligned with the Business Strategy and can define basic rules like:

  • supplier and supplied goods need to be produced in a specific country.

Moreover, this Strategy defines the general Supplier process and organization.

Supplier Policy

Supplier Policy defines specific rules and conditions for the selection of a supplier of defined goods and services. Supplier Policy is aligned with the Supplier Strategy and describes:

  • The Supplier Organization responsible for the suppliers of specific goods and services
  • The Supplier Process for the supplier of specific goods and services
  • Supplier Resources and Roles responsible for the supplier of specific goods and services
  • Supplier Organization responsible for the supplier of specific goods and services including the definition of Supplier Center and Supplier Authority.

Underpinning Contracts

This is a set of legal and operational agreements with a supplier. This ensures the supply of certain services for a specific time period and according to specified conditions. Both parties will need to agree on the legal system used (e.g. US, EU law etc.).

Supplier Contracts to assure SLAs and Service Agreements defined with customer are named Underpinning Contracts (UC).

All variety of different agreements are possible provided that both parties agree. In general, the following focus areas of a contract will need to be regarded:

  • Contract content: all service, specific services, non defined services
  • Contract duration: unlimited, limited
  • Contract parties: who agreed on the contract? who is responsible for delivery of services and goods?
  • Contract SLA: see following text passage
  • Additional agreements: invoicing and payments, escalations, terms for any changes to the contract or contract contents.

SLA for Supplier Underpinning Contracts

These contracts need to have a specific set of rules (Service Level Agreements) which define supplier process and delivery. This includes:

  • Operational processes
  • Time periods for operational processes and activities
  • That the levels of quality for services have been defined in the Service Design.

Reports and analysis on supplier and supplier performance

The monitoring of suppliers and supplier quality is a crucial activity in order to determine the success of a supplier and to determine their quality/ value balance. Reporting Management defines, delivers and improves supplier reporting. The results of these reports will then inform Supplier Management.

Supplier Management requests reports for further analysis from Reporting Management and will assist in the design of these reports.

These reports need to be analyzed on regular basis and then subsequently acted upon. The reports provide the central input for any pricing negotiations with existing suppliers and need to review the following areas:

  • Delivery reliability
  • Delivery quality
  • Number of supplies out of stock
  • Number of issues with delivery quality

Request for Quotation (RFQ)

This is a standardized document for any request, to existing and to potential suppliers, for services and goods. This document should be re-used for different supplier cases.

Record in Supplier and Contract Data Base (SCD)

The SCD Record is the record which holds relevant negotiation information, any other relevant information as well as a history of a specific supplier.

Unique identifier
Supplier ID
Supplier data
Supplier address, contacts
Supplier data
Specifications of supplier
Supplier alternatives
Alternative supplier (if possible)
Supplier contact history
Contact history
Contract data
Contract data contains the terms, conditions, time periods, prices
Supplier Agent: responsible for the supplier contact
Supplier analysis
Statistics and reports on supplier performance

Key Concepts

Supplier Category

Suppliers are split into three supplier categories, which define their value/ commercial importance(based on ABC analysis). Typically each class is handled in separate way and are defined by different supplier policies. These are:

  • Class A: Goods and services of high value, low turnaround time, a sophisticated tender process is necessary (e.g. investigation goods such as a new data centre)
  • Class B: Goods and services of medium value, medium turnaround time, a tender process is necessary (e.g. specialized software of medium value for few users)
  • Class C: Goods and services of minor value (but might have high commercial volume), high turnaround time, easy to be supplied (e.g. office supplies such as mouse pads)

Supplier Class

Suppliers are split into three supplier classes which are defined by the strategic importance for the company (based on supplier market analysis). Typically each class is handled in separate way and are defined by different supplier policies:

  • Class Strategic: Goods and services hard to by supplied, not always available, safety stocks recommended, one or few providers, high supplier risk
  • Class Tactical: Middle classification
  • Class Commodity: Goods and services easy to by supplied, high volume always available, huge number of providers, low supplier risk, price driven supplier market

Request for Supplier (RFS)

Request for Supplier (RFS) should contain following information:

Supplier request ID
Unique identifier for supplier request
Supplier requested
Short and long description of goods, services requested from supplier
Estimated supplier costs
Estimation to be done by requester and is to be supported by supplier team staff
Supplier date (latest)
The date when the Supplier should be available
Business need for the supplier
Explanation of the business need for the supplier
Business case for the supplier
Basic key commercial numbers
Supplier request approval
Approval by the responsible Supplier Sponsor, as defined in the Supplier Policy and Signature Policy.

All supplier requests are to be approved by the budget owner in accordance with the Supplier Policy. In case of minor value goods and services requested, this approval can be delegated to the staff requesting that supplier.


Critical Success Factors

Critical Success Factors (CSF):

  • A close relationship with the Service Definition Process and a focus on Supplier Requirements Definition
  • Contracts and agreements which are detailed, written, agreed, signed and communicated
  • Fair communication and lasting win-/ win situation for partners
  • Long lasting, open and transparent partner relationship
  • Monitoring on partner performance as well as their commercial and organizational situation
  • Clearly defined interfaces
  • Backup solutions for all suppliers

Supplier Strategy Planning

High Level Process Flow Chart

This chart illustrates the Supplier Planning Process and its activities.


Performance Indicators (KPI)

  • Number of changes to Supplier Strategy
  • Number of changes to Supplier Policy

Process Trigger

Event Trigger

Supplier Strategy Planning is not event triggered.

Time Trigger

Supplier Strategy Planning is time triggered and has to be executed at least once a year.

Process Specific Rules

  • the Supplier Manager has to define the Supplier Strategy and Supplier Policy

Note: for the different types of rules see Rules.

Process Activities

Supplier Strategy Definition

The Supplier Strategy Definition defines:

  • Basic supplier rules
  • Specific supplier rules for defined products, goods and services

Basic supplier rules define the handling policies for using that supplier. These rules are business strategy aligned. They define signature policies and approval ranges for a supplier of services and goods. The main orientation rule balances the high quality of supplied goods and required services against the commercial “value for money” obtained. An additional basic constraint, which needs to be established, is a system of checks and balances for the procurement of supplies.

Supplier Strategy Monitoring

Supplier Strategy Monitoring is responsible for the monitoring and update of Supplier Strategy, Policies and Rules.

Supplier Assessment

High Level Process Flow Chart

This chart illustrates the Supplier Management Process and its activities.

Performance Indicators (KPI)

  • Time between a Request for a Supplier and a successful negotiation
  • Number of early Supplier Service Terminations due to bad service delivery

This can be monitored using the following measures: per supplier, per service, per location

Process Trigger

Event Trigger

For more information, see the relevant Process Interface Description in the Process Interfaces Overview

Time Trigger

There is no time trigger.

Process Specific Rules

  • every Supplier triggers the creation of a new RFS Record.
  • the Supplier Owner has to control the Supplier Agent
  • the Supplier Owner and Supplier Agent can only transfer their duties if the new person or group agrees
  • the Supplier Owner and Supplier Agent should preferably be a person rather than a group.
  • refer to service specific and customer specific rules in order to take into account the Service Description and Service Level Agreement

Note: for the different types of rules see Rules.

Process Activities

Supplier Request Recording

The Request for Supplier (RFS) is checked for completeness and formal correctness; i.e. with regards to the desired supplier, it is verified that all mandatory information has been provided by the requester through the RFS form. If this is not the case, or if the requester is not authorized to send RFSs in general, then the RFS can be rejected. The Supplier Record is then shifted into the status „recorded-accepted“ or „recorded-rejected“.

Activity Specific Rules

  • Supplier Requester is set to the person who triggered the supplier
  • Supplier Sponsor is set to the person who triggered the supplier if no other sponsor is known
  • Supplier Agent is set „Supplier Management Team“ if no other person is available as Supplier Agent
  • Supplier Owner is set „Supplier Management Team“ if no other person is available as Supplier Agent
  • Supplier Description The RFS must contain a meaningful description of the desired supplier as well as a comprehensible rationale which states the reasons for the supplier.
  • Supplier Date is set on latest date the supplier should be available for requestor.
  • Process Instance which triggered the Supplier should refer to the respective process instance e.g. Unique Identifier of the Supplier
  • Affected Service, at least one service must be defined

Supplier Selection

One or more Suppliers are selected from the Suppliers List. They must be able to fulfill the requirements. If not enough suppliers are able to fulfill the requirements, new suppliers must be searched and listed.

Activity Specific Rules

  • for this request, put each possible supplier from the General Supplier List onto the Specific Supplier List
  • if list is too short, search for new Suppliers on the market and add them to the General Supplier List and Specific Supplier List
  • otherwise go to control activity „selected“

Supplier Evaluation

After using the Specific Supplier List, every potential supplier receives a Request for Quotation (RFQ) which they can respond to. Suppliers must answer this request by providing terms, conditions and pricing. Following these first responses, the list of possible suppliers is reduced and further defined. Finally, one supplier for negotiations should be identified.

The decision patterns for evaluation of suppliers might be:

  • Functional:
    • Does the supplier provide requested functionality?
    • Does the supplier provide a KO-defined functionality?
    • Does the supplier provide an additional functionality?
  • Technological:
    • Basic concepts or architecture?
    • State of the art?
  • Service Related
    • Operational concept and support?
    • After sales service?
  • Pricing?
    • Prices? Deals?
  • Supplier company/ Market related
    • Commercial stability of supplier?
    • Convincing future story?
    • Innovation patterns?
  • Strategy
    • Fits with the IT Strategy?
    • Fits with the Supplier Strategy?
    • Fits with the Company Strategy?
  • Reference oriented?
    • Known references in market?
  • Implementation Concept
    • Concept for implementation?
    • Resources for implementation?
  • Quality standards?
    • Is the supplier certifed (ISO 20.000 and/ or ITIL)?
    • Are the required services certifed (ISO 20.000 and/ or ITIL)?
    • Is the implementation certified (ISO 20.000 and/ or ITIL)?

Activity Specific Rules

  • send a Request for Quotation (RFQ) to every possible supplier
    • if no answer is received, then the supplier should be removed from the Specific Supplier List
  • evaluate the answer from each supplier

Supplier Negotiation

A negotiation is conducted with the first supplier in the list. If successful, an underpinning contract with the supplier should be agreed, legally checked and approved by the responsible resources. Signed contracts are documented in the SCD.
Activity Specific Rules

  • if the negotiation is successful
    • sign a contract and document this in the record
    • go to the control activity „negotiated“
  • otherwise
    • document the failed negotiations in the record
    • start a negotiation with next supplier on the list, otherwise
    • if the list is empty, go to the control activity „canceled“

Supplier Service Delivery

This is based on a valid contract that ensures the service is delivered and the delivery is controlled.

Supplier Service Termination

If a supplier contract is cancelled, several operational issues need to be clarified:

  • Transition of the operational processes
  • Transition of documents and artifacts
  • Transition of roles and responsibilities

Service Design and CRM should be informed.
Activity Specific Rules

  • Define rules for the transition of the cancelled contract
  • Cancel supplier contract
  • Inform CRM and Service Design on the contract cancelation
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