Supplier relationship management requires a look in the mirror

Filed Under Blog | Comments Off on Supplier relationship management requires a look in the mirror

When it comes to building relationships with your suppliers, sharing requirements and discussing performance is a direct way of underlining your expectations. For many organizations this is often carried out within the boundaries of a supplier workshop or development review. From the viewpoint of the buyer or commodity manager it can be all too tempting to look at the failures and attempt place the blame for performance and failing to meet expectations solely at the feet of the supplier.

However, in reality, most organizations would benefit from and should employ two way dialogue engaging the suppliers to articulate their perspective on what could be done to improve the situation and the important killer question – “what do we as a customer do wrong”.

What to focus on?

When discussing performance and development issues, the areas to focus may vary from company to company but the typical issues that many businesses face involve QCD (Quality, Cost and Delivery) – But if you now look at it from the suppliers perspective – how can you as a customer influence these aspects?

Lets consider the following:

Quality

• Incorrect Drawings
• Poor Engineering/Technical Support from customer
• Unclear specifications or definitions
• Poor customer feedback

Cost
• Buying policies – will only comit to small batches but buys regularly
• Not open to designing out cost
• Inflexible on packing/shipping requirements
• Wont undertake a joint savings initative
• Sees cost down as just an attack on profit

Lead-time
• Inaccurate leadtime data in customer system
• Ineffective buying policies
• Lack of customer innovation (no kanban, VMI etc)
• Wont relax specifications
• Poor PO commitment

Added to these issues is the equally important issue of the relationship that you have with the supplier – What are you like to do business with? For example:
• Are there effective lines of communication?
• Are you open to change and innovation?
• Are you performance driven?
• Is there an effective commercial arrangement?
• Is there open and honest dialogue?
• Are you clear in what you want and how you want it?

Summary

We all want to have an effective supplier base but this does take considerable effort both in terms of the initial sourcing and the management/development of the supplier. The start point is obviously dialogue and a critique of the current situation but if you only look at the supplier in this critique you’ll be missing probably half (if not more) of the problem and to develop a truly effective (and mutually beneficial) relationship any critique should also involve the customer.

Is It Possible To Be Too Tough On Your Suppliers?

Filed Under Blog | Comments Off on Is It Possible To Be Too Tough On Your Suppliers?

For many supply chain personnel – the answer to this question is easy! – Not only is it possible to be too tough on your suppliers; it is actually quite easy to be too tough with your suppliers! The relationship between customer and supplier is often vicarious – in that whilst it is one that should be mutually beneficial, business issues often unforeseen can stretch that partnership to the limit.

One of the key tasks for supply chain personnel is to ensure stability for material flow. Establishing a reasonable working relationship to facilitate this whilst it wont manufacture parts for you, will help establish a framework in which to operate and one that provides for both parties.

One of the key areas of ‘robust management techniques’ often relates to price and contract negotiation. Old school procurement thought that if you screw your supplier to the lowest price you were getting a good deal. Clearly the supplier has to be motivated to deliver an effective service and where profits are minimal and risk is high – it’s unsurprising that issues (often in terms of quality and delivery) can occur.

What’s important is to strike a balance in the relationship – the supplier needs to be allowed to succeed – by creating a situation in which you constantly demand then you are likely to introduce problems. For example I’m sure that we’ve all placed demands on suppliers due to pressure in our own business in terms of:

• Inappropriate lead times
• Price reductions
• Re-priorities
• Drastic short term change to agreements/relationship

There are real advantages to having a productive relationship with suppliers. Avoiding roles of subordinates but instead utilizing suppliers as a partner can foster collaboration and ensure effectiveness.

Wrapping the relationship within the terms of a formal agreement that encompass business requirements, performance measurement and issue resolution is key. Given that the emphasis is now to have a relationship that is based on respect and rust, the obligations contained in the contract that exists provide the framework on which the relationship can develop. But the obligations not only have to be met by the supplier but by the customer too. Remember that the supplier can only function based on the information it has at its disposal.

Where there are problems in delivering requirement either through quality, missed delivery schedules or other quantifiable problems then clearly appropriate measured action needs to be taken. Effectiveness can be improved through establishing ground rules either for improvement activities or exit strategies where issues necessitate. Simply picking up the phone, however, and barking orders at the supplier is unlikely to deliver results over the longterm.

Relationships that are mutually beneficial, of which is typical of a supplier/buyer relationship, do not get anywhere if one party is too tough (or overly lenient) on the other. It may even be worth looking at the relationship between customer and supplier as being one that is a bit like a marriage or partnership. It needs to be respectful and effective or else there is little hope that it will manage to survive for any length of time.

Next Page →