The development and management of supplier relationships
to acquire goods and services are critical in achieving the immediate needs of the business. But what are the things to do and how can sourcing and quality work better together to support the business strategy? Managing your supplier community is a journey. If your strategic sourcing is not mature enough to have “Trusted” Partners or involve collaborative innovation, then developing a multi-step plan to reach your business goals is needed.
So, what are the key steps that should be in your Plan to help you through your Journey?
1) Communicate your Strategy;
2) Standardize Ways of Working;
3) Rationalize your Supplier Base;
4) Assess Quality and Risk; and
5) Measure to Drive Performance.
Communicate your Strategy
In communicating your Strategy, make sure you are approaching it with a balance scorecard approach. Let your suppliers know what your overall objective is financially concerning your parts/material and products. What you want for your customers that will help differentiate your company from competitors. What processes you want to improve with the supplier. Lastly, the kind of innovation you want to achieve, for example, early collaboration in design.
Standardize Ways of Working and Rationalize your Supplier Base
But communicating your strategy is not enough. Strengthening your overall communication about the ways of working together will help both you and your suppliers continuously improve. Examples include identifying best practices, mapping process flows and approvals, creating standard agreements to reflect best practices, alignment of key functions to business flows, document exchanges and identifying measurements for reporting. Not all your suppliers may fall into this journey and will use this approach. Manufacturers will need a rationalized supplier base (segmented based on strategic importance, volume, sole source, high risk, etc.). To keep suppliers on track, communication needs to continue with updates to strategy, business reviews, operational and planning meetings (including sampling approach), and a commitment to transparency and performance.
Assess Quality and Risk
Assessing quality and risk should be an on-going process with a constant feedback loop. Although we tend to look at a supplier’s overall performance, allowing suppliers to provide feedback about your company and processes brings you to closer collaboration. In addition, having a balanced scorecard will offer your organization a qualitatively better view of supplier quality and success and help personnel make good, fast decisions on what to improve or celebrate. So, what’s wrong with this picture? Balanced scorecards are rarely balanced. Companies still focus on performance along with a single dimension, try to capture too many measurements that are not connected to strategic objectives and often focus entirely on internal interest vs. a customer’s perspective. Balanced scorecards can sometimes suffer from focusing on identifying “how” to measure performance before articulating either what or why to measure at all.
Measure to Drive Performance
Once we do have the “right” measurements and the meaning of success, then what? Outcomes should trigger actions. Often companies forget to link measurement outcomes to actions many of which can become standard processes. For example, with quality incidents trending higher or lower, organizations can have plans that can immediately change sampling and acceptance level from inspections. Tremendous improvements with a trusted partner can lead to “dock to stock,” vastly reducing the cost and time from receiving to inventory. A drop in quality may require collaboration to help the supplier get back to expected results and puts them on a “watch list.” Continued lower quality trends may trigger an immediate hold on further purchases or even begin the process for a replacement. Lastly, don’t forget to share your measurements and potential outcomes back to the supplier to help drive improved performance.
The moment of truth…
Take our Supplier Collaboration Capability Maturity Survey
and see where you are in your Journey.
Check back for further parts of our Supplier Management Blog!