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Tailoring Your Supplier Strategy: Managing Direct and Indirect Relationships


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by Sri Gopinath

As procurement continues to evolve in complexity and scope, several requirements could differ between direct and indirect suppliers. While Procurement teams are tasked with managing both direct and indirect suppliers, each category plays a unique role in delivering value.  This requires supplier management strategies and selection criteria that could be different, managed by stakeholders who may also be different. Trust Your Supplier (TYS) offers a comprehensive platform designed to streamline supplier management across the entire supply chain.  

Understanding Direct and Indirect Suppliers

Direct Suppliers
They are providers of goods or services directly incorporated into a company’s end-product. A direct material supplier provides raw materials, components or subassemblies that are directly used in the manufacturing process of a company’s products. For example, a steel supplier for an automobile manufacturer or a cloud services provider supporting a software firm’s hosted solutions. Relationships with direct suppliers are collaborative, and tend to be long-term, focusing on consistent quality and reliability with recurring demand patterns over the product life cycle.  

Indirect Suppliers
These suppliers support the company’s needs for production and overall internal operations without being integrated into the final product. They encompass a broad range of goods and services, from production line spare parts and office supplies to software subscriptions, research & development, facilities management. The need for these products and services can vary greatly from month to month.  

Managing Direct Suppliers

Effective management of direct suppliers is crucial, given their impact on product total cost of ownership, quality, and delivery timelines. Key strategies include: 

  • Risk Management: Ensuring suppliers maintain necessary certifications and comply with industry standards to meet regulatory requirements
  • Operational Compliance: Verifying that suppliers adhere to company policies, including insurance coverage and ethical practices
  • Proactive Mitigation: Understanding and staying ahead of potential company exposure due to supplier factors is critical to preventing potential negative impact from social, sanctions, and reputational perspectives
  • Collaborative Planning: Engaging in joint forecasting and innovation initiatives to enhance product development and address potential issues proactively
  • Supplier Key Information: Gathering key information from suppliers to facilitate operations and transactions – e.g., business license, tax forms, bank account for transactions, etc. 

Trust Your Supplier (TYS), facilitates these needs through the creation of a secure digital wallet for each supplier with key information that is independently verified, along with: 

  • A centralized repository for certifications and essential documents 
  • Digitally enabled customizable workflows and questionnaires for onboarding 
  • Continuous monitoring of relevant company information 
  • Reports and visual dashboards for ongoing performance management

Tools for Managing Indirect Suppliers with TYS

While TYS provides similar firmographic information for suppliers, managing indirect suppliers may need to be set up differently due to unique needs, separate approval structure, etc. TYS supports this through: 

  • Bank Validation: Independent verification of banking information of information provided by suppliers to reduce the risk of fraud and create a traceable and verified process for managing account changes
  • Rapid Onboarding and Offboarding: While questionnaire capabilities are similar to direct suppliers, indirect supplier questionnaires and workflows may need to be set up differently to accomplish the onboarding and continuous monitoring process while ensuring compliance needs
  • Supplier Discovery: The supplier secure digital wallet created through registration on the TYS platform provides access to a network of vetted and trusted suppliers, enabling quick identification, outreach, and engagement of new suppliers as needs arise
  • Compliance Assurance: Implementing standard workflows that guide internal teams through the necessary steps and decision recommendations to onboard suppliers with full confidence

The evolving procurement environment demands efficient and effective management of both direct and indirect supplier relationships. By recognizing the distinct characteristics of each and employing tailored strategies, businesses can optimize their supply chains, mitigate risks, and enhance overall performance. Trust Your Supplier stands ready to support organizations in achieving these objectives through its robust supplier management platform. 

April Harrison Blog, Supplier Information Management 0 Comments , ,

2025 Manufacturing Industry Insights: Navigating a Web of Opportunity and Challenge

by Sri Gopinath

The manufacturing industry stands at a critical juncture in 2025, fueled by technological advancements, economic pressures, and evolving consumer demands. Across North America, Europe, and Asia, manufacturers are navigating a landscape filled with both opportunities and challenges. 

Snapshot of the Manufacturing Landscape

  • Growth: The global manufacturing industry is projected to achieve a 4.9% Compound Annual Growth Rate (CAGR), growing from $13.5 trillion in 2023 to $20.8 trillion by 2031, driven initially by slowing inflation and declining interest rates.

  • Investment: Significant investment in manufacturing, particularly in clean-technology facilities, is expected to create jobs and drive further growth.
  • Challenges: Higher costs for input materials and ongoing talent shortages remain key hurdles. 

North America
The U.S. manufacturing sector is witnessing unprecedented investment in clean technology and semiconductor production, spurred by legislative initiatives such as the Infrastructure Investment and Jobs Act (IIJA), the CHIPS and Science Act (CHIPS), and the Inflation Reduction Act (IRA). These policies have led to a surge in construction spending on new manufacturing facilities and job creation. Advanced manufacturing technologies, including AI-driven robotics, 3D printing, and smart factories, are helping enhance efficiency and reduce dependence on manual labor. 

Despite these advancements, economic uncertainty and persistent labor shortages temper optimism. The National Association of Manufacturers (NAM) forecasts growth in the 1-4% range for 2025, with price increases between 1.7-2.6% and inflation hovering around 2-3%. Following the November 2024 U.S. general election, domestic manufacturing policies may intensify trade disputes, potentially causing reconfiguration of supply chains in order to stay ahead of any cost or delivery risk. 

Europe
European manufacturers face dual challenges of economic uncertainty and evolving environmental regulations that have become one of the top priorities for the region, in addition to addressing geopolitical issues. The drive toward net-zero emissions has spurred investments in green technologies, yet geopolitical tensions and fluctuating demand present significant obstacles. 

Key regulatory developments include: 

  • Omnibus ESG Regulation: A consolidated sustainability framework incorporating reporting needs under the CSDDD, CRSD and unified EU Taxonomy due to roll out in 2025, creating a time critical need for businesses. 
  • Digital Operational Resilience Act (DORA): Though primarily targeting the financial services sector, DORA’s risk management requirements are expected to impact manufacturers if they do business with financial services companies through products, services and data handling. 

Asia
Asia remains a manufacturing powerhouse, led by China and India. However, rising labor costs, supply chain disruptions, and the imperative for technological upgrades require a pivot toward smart factories and digital transformation. Sustainability efforts are also gaining traction, with innovations aimed at reducing plastic waste, improving recycling, and adopting biodegradable materials to align with global environmental expectations. 

No Shortage of Challenges

The 2025 global supply chain landscape is marked by complexity and fragility. Geopolitical events, such as trade tensions between major economies, growth in tariffs, and rise in trade barriers significantly impact supply chains. 

Labor shortages, compounded by aging workforces and widening skills gaps, are another pressing issue. Rapid technological advancements, such as AI and automation, demand new skill sets and substantial workforce investments. Environmental and sustainability pressures also necessitate a shift toward greener practices and sustainable supply chains. 

Consumer demand further complicates the landscape, with increasing emphasis on sustainability, personalization, and wellness. The ability to adapt quickly to these evolving preferences is critical. 

At the heart of these interconnected challenges is the need to strengthen supply chain resilience. Manufacturers must prioritize transparency and agility to navigate risks and reposition effectively in an ever-changing environment. 

Charting a Course for 2025

To navigate these challenges and seize emerging opportunities, consider the following strategies: 

  1. Invest in Digital Transformation: Embrace technologies like AI, IoT, and blockchain to enhance supply chain visibility, efficiency, and resilience. Leverage predictive analytics and smart manufacturing to anticipate and mitigate disruptions. Simplify, standardize, and digitize operational processes

  2. Focus on Workforce Development: Address labor shortages by investing in upskilling programs and technology. Partner with educational institutions to source and develop talent.

  3. Leverage Sustainability for Competitive Advantage: Integrate sustainability into core business strategies. Invest in green technologies, reduce waste, and improve energy efficiency. Set ambitious sustainability goals, develop measurement capabilities and adopt transparent reporting practices to track progress to company-wide targets, while extending them into the supply base.

  4. Strengthen Risk Management: Implement robust frameworks to identify and mitigate potential disruptions. Conduct regular risk assessments, develop contingency plans, and invest in cybersecurity.

  5. Respond to Volatile Consumer Demand: Link sales and demand planning tools with internal production and supplier management to enhance responsiveness, agility and visibility of across the end-to-end supply chain

  6. Enhance Supply Chain Flexibility: Adopt flexible strategies that can adapt to geopolitical and economic shifts. Diversify suppliers, build inventory safety stock for business critical items, and prioritize local or regional sourcing to mitigate risks.

By adopting these strategies, manufacturers can position themselves to thrive in the face of 2025’s complexities. At Trust Your Supplier, we deliver enhanced supplier management and risk viability solutions to help you meet the challenges that lie ahead.  Success lies in embracing innovation, fostering resilience, and committing to sustainable practices.  In this rapidly evolving landscape, the ability to adapt and lead will define the manufacturing leaders of tomorrow. Learn more about how TYS’s blockchain-driven platform can position you for success in these uncertain times.

April Harrison Blog, Manufacturing 0 Comments ,