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WHAT GOOD SUPPLIER MANAGEMENT LOOKS LIKE
Strategy · Supplier management is driven by supplier segmentation. · Contracts management (CM), supplier performance management (SPM) and supplier relationship management (SRM) activities are undertaken according to the supplier’s segment. · Business information is shared with suppliers. · Joint initiatives and improvement plans are implemented with suppliers. · The benefits of effective supplier management are tracked. These include cost reduction, performance improvement, risk mitigation, early access to innovation, access to scarce resources, and so on. · The organisation is considered a strategic customer (‘customer of choice’) by its strategic suppliers. · Typically, no more than 50 suppliers would be classified as strategic, which would normally account for more than 50% of an organisation’s third-party spend. Process · Supplier segmentation is based on multiple, weighted criteria such as spend, risk, potential for innovation, strategic alignment and perception as a customer of choice. · Supplier segmentation is regularly updated to reflect the dynamic external environment and changes in strategic direction. · Supplier management activities depend on the segment a supplier has been allocated to, and consist of a blend of contract management, performance management and relationship management. · A range of tools are used including balanced
Strategy
Supplier Management
Process
People
Technology
· There are joint account plans in place for strategic suppliers. · The benefits of supplier management are measured and, where appropriate, shared with suppliers. · There is joint risk assessment and development of risk mitigation actions. · Joint cost-saving initiatives are in place (with the benefits often shared with suppliers), which results from addressing inefficiencies in the supply chain, cost avoidance and better understanding of cost drivers. · Strategic objectives are shared with the most critical suppliers to ensure strategic alignment and co-ordination of resources and activities. · An open and honest relationship has been established based on trust, mutuality and collaboration. People · People are equipped with technical and commercial skills as well as interpersonal skills such as facilitation, effective communication, stakeholder management, trust building and leadership. · Dedicated individuals are allocated to managing the most important suppliers. · A cross-functional ’virtual‘ team is in place to manage key suppliers. · Strategic suppliers have appointed an equivalent accountable executive to lead the relationship. Technology · Technology is used to facilitate collaboration and information sharing between the customer and its supplier(s). · There is a central repository for information about the supplier which includes spend, contracts, performance, financials, projects, risks and issues, stakeholders, innovation and other pertinent supplier information.
scorecards, 360-degree relationship questionnaires, and risk assessments.
Depending on supplier segmentation, KPIs can be two-way to reflect a mutual and collaborative relationship. Performance assessment is followed by agreed improvement plans. · Information is shared between the customer and the supplier(s). · Feedback is solicited from suppliers regarding your performance as a customer and opportunities for improvement. · Regular meetings are scheduled to cover various elements of the relationship with suppliers, including performance, risk management, innovation etc. · There is a clear process in place to capture, evaluate and implement supplier ideas and innovations.
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