Supplier Management - why bother?

A few initial thoughts from me on the subject of supplier management as I get the ball rolling with this blog...........all feedback welcome.

How proactively do you collaborate with your suppliers? There are a number of services we procure that we just expect to work - we pay for our electricity supply so when we flick the switch we expect the lights to come on. We don’t want and shouldn’t need regular meetings and reports to ensure the service is as it should be. This would be added cost and effort for the supplier that is wholly unnecessary.

We do need to maintain an overview of the relationship and manage the contract to ensure we are getting the service and performance we expect and agreed at the outset. Should there be a degradation in service then we rightly expect the supplier to assume responsibility and develop a swift resolution.

If we have put a robust contract with service levels and service credits in place for the above service then we should be relatively comfortable that we do not need to commit too much of our own or the supplier’s resource to maintain this relationship. If that contract is weak we may experience issues and delays as the ambiguity and uncertainty of poor contractual terms and lack of relationship kick in.

At the other end of the spectrum there are services we procure that are integral to the ongoing performance of our own business and they will require investment of time and effort by both parties. In many instances the service expectations set out on day one will evolve over the course of the relationship. This occurs as a greater knowledge and understanding is developed, as efficiency opportunities are explored, as the market evolves and as new products are developed. If we maintain regular dialogue and actively manage the performance of our supplier services we can expect to start seeing tangible benefits to our own business. Perhaps 10 day lead times turn to 5 and subsequently we can deliver products to our customers quicker; perhaps the supplier comes to us first with innovative ideas that could help us gain a competitive advantage; perhaps suppliers are closer to market changes and bring us early insight that helps us prepare. Collaboration can deliver many benefits.

Segmentation: In order to determine where our suppliers fall with regard to strategic importance it is important to segment our supply base. This helps provide understanding of those suppliers that are core to our business and generate strategic value versus those that provide transactional, relatively transferable services. We can then dedicate our own resources to the most value generating suppliers.

Management Effort: All too often businesses expend a significant amount of effort up to the point of signing a contract and then just expect everything to run perfectly. It is at this point we run the most risk of wasting all that time and effort, as the potential value from the supplier falls away through lack of management.

Where we fail to manage our suppliers and their performance we can't expect to see a return on our initial investment. To flip that, where we focus efforts and collaborate with the appropriate partners in our supply chain we can see true added value that has the potential for significant, tangible benefit for both businesses.

Do you know who your key suppliers are? May well be worth thinking about where you currently do and don't invest your time in supplier management.