Supplier Relationship Management – A series of short discussions
Managing supplier relationships to manage risk
How seriously does your organisation take supplier relationship management (SRM)? In some organisations, the management of supplier relationships is delegated to those who may be at the more junior end of the experience continuum and adopt a heavily compliance based approach.
But there is an argument to say that managing high value supplier relationships is as important as any other area of RISK management given the potential impact of supplier failure on an organisation – ask BP! – which demands a more experienced eye to understand the bigger picture in terms of threats and opportunities. What are your thoughts
One way or two?
Many of those whose role is classified as SRM formally assess their supplier base on a regular, usually annual basis. This could take the form of an online assessment tool hosted internally or via a third party specialist or a simple score-card using an Excel spread sheet or some other mechanism.
The interesting thing, though, is the extent to which those undertaking the assessments are themselves assessed by the suppliers, to make the process a truly 360 affair.
Some companies embrace this concept recognising that the performance of suppliers against targets/objectives is massively influenced by the ways in which they are managed. Others, as someone said to me last week ‘don’t like to be told what to do by the people who work for us’.
Who’s right and who’s wrong?
How are procurement and sourcing departments assessed?
I was talking to a provider of marketing services a couple of weeks ago who was bemoaning her dealings with the procurement department of her client, a multinational operating across a number of market categories.
Her complaint was that the procurement people she dealt with didn’t seem to understand the dynamics of the business in which they were operating, exemplified by a desire to always seek the lowest cost solution.
This was manifested in the conundrum that the client wanted to improve the quality of the team but wasn’t prepared the pay the higher salary costs associated with hiring better people.
It got me thinking. How is procurement/sourcing people’s performance assessed? Is it always about being able to demonstrate a lower cost solution?
SLA assessment vs. relationship management
Supplier Relationship Management is a three word phrase describing an activity that can be critical to the heath of any company particularly where the suppliers are considered strategic.
Interestingly though, while many companies spend a lot of time drawing up detailed criteria for service level agreements and actively measure their suppliers’ performance against these, far fewer seek to actively assess the strength of their supplier relationships.
This seems a little odd particularly in areas where the suppliers are service providers and the providers of the service are after all people. In these situations people are the pivots of relationships.
Ever look in the mirror…?
You have the opportunity to formally review your supplier’s performance in delivering that which they are contracted to deliver. You identify areas in which they are not delivering to your requirements or expectations and are happy to pass this feedback on to them.
How often do you ask whether there are any aspects of the way in which you are managing them/the supply process that is inhibiting their ability to deliver what you want?
Taking it one stage further, do you give the supplier a regular opportunity to say what they think about your/your company’s attitude, behaviour or delivery?
And one stage further again, attend to the issues that have been raised and see a difference in their performance as a result..?
Or do you assume that as you’re the customer/client you don’t need to look in the mirror…?
It never ceases to amaze me when we conduct client audits on behalf of suppliers or service providers that irrespective of industry type, the number one item on clients’ wish-lists is for more leveraging of the suppliers’ experience with/learning from other clients to the benefit of the client being audited.
Every client seems to want to benefit from this short cut to ‘the inside track’ but it is astonishing how many suppliers don’t do this as a matter of course, unless they are specifically asked.
Does anyone have any examples of suppliers or service providers who are particularly proactive in this area?