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.