If you want to be successful at just about anything, whether it be marketing, supplier management, cost reduction, revenue improvement, or innovation, it helps to know the situation and understand the details. Let’s take supplier management for example. For many companies, materials are the largest expense. Yet many materials professionals issue purchase orders to the low cost supplier and fail to follow up to see if the materials actually arrive. Supplier management is loose at best.
Know What You Want
There are three vital areas to knowing the situation and the details in supplier management. First, you have to know what you want. This involves clear specifications, expectations for performance in quality, delivery and cost, and knowing the supplier’s capability. Even knowing who the top suppliers are is a challenge for some companies.
As part of my supply chain evaluations, I analyze the supplier base using a descending year to date payments report. During the final presentation I ask executives who their top five suppliers are and you would be surprised how often they don’t know. That is knowing the details.
Measuring supplier performance is the second key. For top suppliers, performance should be measured monthly on the metrics of delivery on time, quality, cost reduction and other subjective factors such as how easy it is to clear up invoice issues. I have often found that not only do companies not know how their suppliers are performing, but often the suppliers themselves don’t know either.
This brings me to the third point which is communication. Internally, communication is comprised of clear specifications, clear expectations, and clear feedback. Externally, suppliers need to not only get their performance report, but quarterly review sessions should be held with top suppliers to review performance, new opportunities, cost and lead-time reduction activities, etc. In addition, annual supplier meetings should inform suppliers of planned new products and other opportunities for them to grow their business serving your company.
To improve supplier performance and relationships, know the situation and dig into the details. What you find may surprise you and save the company a lot of money.
© Rick Pay 2011 – All Rights Reserved