Daily Archives: November 19, 2014

Procurement Trend #16. Stronger Supplier Relationships

Thirteen anti-trends from those crazy eighties (or earlier) still remain, and as much as we’d like to provide some entertainment that hasn’t been rebooted and re-rebooted to LOLCat who is bored with our continuing anti-trend coverage, we must continue to play Sam Sheepdog and make sure that no Ralph E. Wolfe in sheep’s clothing goes undetected or unrewarded for his effort.

So why do so many historians keep pegging stronger supplier relationships as a future trend? Besides the fact that they are likely still struggling to pronounce col-lab-o-ra-tion (which is a undoubtably a new word for them), it is probably because even the Businessman knows that:

  • delivery dates can make or break a product release and a company

    as a late launch can allow your competition to launch first and secure a substantial amount of marketshare that your company may never get back

  • knowledge work needs to be done with knowledge

    and you can’t fake it by throwing more warm bodies at it

  • supplier failures can often be prevented, but only with foresight

    once a supplier’s doors have been closed, it’s too late to reconsider that 180 day net-terms policy

So what does this mean?

Delivery Dates

Product Lifecycle Management (PLM) is key. In order to make sure everything stays on schedule, Supply Management has to monitor, or manage as the case may be, the design, the supplier selection, prototype production, full production, transportation, and the delivery schedule. Any delay anywhere in the process that goes uncaught and uncorrected in a timely fashion will result in a missed delivery date.

Knowledge Work

As per our many previous posts, including our posts on inter-departmental collaboration, more stakeholder collaboration, and talent, we’re in a knowledge economy and supply management is knowledge work. Implement a good Knowledge Lifecycle Management solution, get training, collect knowledge from your employees, partners, suppliers, and customers and put it to use.

Supplier Failure

Suppliers typically fail for financial reasons, and this is often something that can be foreseen. You can follow the financial risk ratings, or you can just pay close attention to what is happening. There are always cues when a supplier is in trouble. Multiple contacts disappear overnight. Late deliveries. Poor quality. And so on. Often it’s just a cash-flow problem that is easily fixed by simply paying the supplier a little earlier (which, for many companies, translates into simply paying the supplier on time) so it can cover its operating costs. When you consider that the supplier has to buy the raw materials, produce the goods, ship the goods, wait for you to get them, and then wait for the clock to start ticking on the invoice when you can often sell the goods as soon as you get them, it’s completely understandable that they can be struggling to make payroll when they have to float operations for six months or more when you, if you are selling a hot electronics item or piece of apparel, can get paid in six days or less.