Category Archives: Supplier Management

Want to Know How Well You’re Doing – Ask Your Suppliers

A recent piece over on SupplyManagement.co on “commit to canvass” reminded me that sometimes the best way to figure out how well you’re doing is to ask your suppliers. While benchmarking is critical, it won’t always give you the full picture.

For instant, just because your benchmark says you “order on time 99% of the time”, that doesn’t necessarily mean you’re doing a bang-up job of getting your orders in on time in the supplier’s view. For example, let’s say the contract says you’ll endeavour to get your orders in 14 days early, but “rush” orders can be put in with only 7 days notice. Well, just mark every order “rush” and make sure it’s in 7 days early and you’ll hit your on-time order target. But if the contract says that you only expect 10% of orders are going to be “rush” but 70% of orders are “rush”, how happy do you think your supplier is going to be with you?

And how will you know if the supplier thinks your “cooperative” problem sessions are delivering value? For instance, if you have team members who always end up doing what they decided before the joint session anyway, it won’t be “cooperative”, the supplier will see no value, and they’ll be upset at you for wasting their time.

You need to ask your supplier how you’re doing once in a while. And, to get brutally honest answers, you should make an anonymous survey a regular communication mechanism. Thanks to modern technology, they are cheap and easy to design, administer, and amalgamate. So ask you’re supplier how you’re doing. I guarantee you’ll be in for at least one surprise.

Share This on Linked In

Vendor Reference Checks

Do you know the right questions to ask?

For example, of the following eight (8) questions, four (4) are good, and four (4) are not so good. Do you know the difference?

  • What’s your relationship with the vendor?
  • How well has the vendor worked out for you?
  • Would you recommend the vendor?
  • Describe a situation where the vendor disappointed you and how they rectified the situation.
  • What are some things you’d like the vendor to do differently?
  • Have you had any major problems with the vendor?
  • Give one reason you wouldn’t recommend the vendor.
  • How do you interact with the vendor?

If you don’t know which of the questions will yield the answers you need to make a good decision in vendor selection, check out Charles’ recent piece on “Vendor Reference Checks: Worthless or Worthwhile”, because it’s not only what you ask, but how you ask it. (After all, a vendor will never give a bad reference.)

The Missing Key to Supplier Performance in most SRM Initiatives

Trust.

That’s right, trust. Specifically, trust in the supplier. Now it’s not always possible, but if the supplier is providing a strategic product or service, shouldn’t you be able to trust the supplier? If you have to monitor each and everything the supplier does, is that really a desirable situation?

And if you have a supplier that is trustworthy, you might find that less monitoring improves results, as the supplier wants to demonstrate that your faith in them is well deserved. (Furthermore, the supplier will have more time to focus on their work if you aren’t nagging them for an update every five minutes). As proof, consider this recent tidbit buried about 2/3rds of the way into this recent article in the CPO Agenda on “When do we get to SRM?”

“One contract, for example, was managed by more than one full-time officer but this was adding no value. We decided it wasn’t a strategic supplier and the contract would have performed automatically anyway. So we took away the dedicated officer with no detriment to the service. In fact, it resulted in the supplier feeling more trusted.”

Now I’m not saying you shouldn’t monitor contracts and results, but that it should be done in moderation and that the best scenario is one where monitoring is automated and you only need to get involved when early warning indicators indicate that there may be a problem. You want to be spending your time building a better product or service for the end customer, not wasting it double checking every little thing your supplier does … because, in that case, you might as well be doing the work yourself!

Share This on Linked In

To Really Be Successful At Supplier Risk Management, ADMIRE!

Not only is supplier risk at the forefront of thought these days, but articles on it are at the forefront of online publications as well, including this recent article in Supply Chain Digest on the key drivers of successful supplier risk management. However, most of the articles miss the point.

For example, according to this article, the trick to successful supplier risk management is to:

  1. engage top-level management,
  2. segment suppliers based on relative risk,
  3. rigorously measure and manage risk,
  4. give category managers tools and training, and
  5. collaborate with key suppliers.

Which is all good advice that is fine and dandy, but it misses the point. Risk management is all about identify risks, identifying mitigations, monitoring risks, and executing mitigations at the appropriate time. Management support is important, but it doesn’t have anything to do with risk identification or mitigation. Segmentation is a good tactic as more attention needs to be placed on suppliers which represent more significant risks, but again it has nothing to do with risk identification or mitigation. The same goes for giving category managers tools and training. Collaboration is relevant only if the mitigation requires collaboration. In other words, in this list, the only key driver is the “rigorous management and mitigation of risk”.

The reality is that success depends on your ability to ADMIRE the situation. Specifically, the ability to:

  • Ascertain the risks,
  • Define the risks that could cause significant damage,
  • Monitor those risks,
  • Identify appropriate mitigations,
  • React when signs of the risk begin to materialize, and
  • Engage the supplier when collaboration is required to mitigate the risks.

That’s it.

Share This on Linked In

Five Ways to Maximize Profits from Supplier Automation

A recent article in Industry Week on “5 Ways to Maximize Profits” from Supplier Automation had some good tips on how to maximize your return from your supplier automation, provided they are implemented properly. This post will explain how to get maximum results from Industry Week’s tips.

  • Avoid the 80/20 trap

    When you only automate 80% of your suppliers, what happens is that the remaining 20% consume 80% of your procurement staff’s time and effort who have to enter data, track down errors, and deal with inquiries that would be avoided with an automated system. In other words, 80% isn’t enough. You have to keep automating until the return isn’t worth the investment. While this number will vary from company to company, generally, you have to insure that at least 90% of all document exchange is automatic, if not 99%. You keep going until the ROI (annual savings / annual cost) of automating the next supplier is less than c, for c between 2 and 3.

  • Make it Affordable and Beneficial

    Not only does it have to be affordable, but it has to make your suppliers’ lives easier. If not, it won’t be adopted.

  • Beware the Middle Man

    As the article says, another unnecessary, and completely avoidable, cost, for both you and your supplier, are the recurring monthly fees charged by “Value Added Networks” (VANs) or other such middle party service providers. Let’s face it, you know who your suppliers are, and your suppliers are quite willing to make their catalogs available to you for free because they want your business. Don’t pay an extra fee for what you already know and have access to.

  • Make Supply Chain Data Actionable

    Automating document transfer enables transaction savings by significantly reducing processing costs, but it doesn’t provide strategic savings unless you act on it. Make sure the tool allows for event driven, alert-based workflows that allow you to detect unexpected events and patterns as they happen so that you can make course corrections “mid-stream”.

  • Measure and Respond

    Continuously benchmark tool usage and process times and take action if the benchmarks don’t continuously improve.

Share This on Linked In