Supplier Development Program Function for Enterprises

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At which level does your supplier development program function?

Supplier development programs can be arranged into two broad dimensions: The one dimension concerns itself with the type of continuous improvement that the supplier develops while the other concerns itself with the scope at which this continuous improvement occurs (Sako, M.; Supplier Development at Honda, Nissan and Toyota: Comparative Case Studies of Organizational Capability Enhancement; 2002).

Let’s use an example of the maintenance practises of an organisation to illustrate the different levels of continuous improvement linked to the first dimension:

Level 1
An operator might discover that the machine he uses breaks down after every x amount of hours. This is the first form of learning. The maintenance department might now be called in to assist in repairing the machine and lengthen the amount of hours before the machine breaks down again. This level of leaning is specific to a product or piece of equipment or even a process.

Level 2
The second level of learning would now include changing practises or systems within the company such as including a preventative or autonomous maintenance system that would significantly increase the life of the equipment and increase throughput or other improvement areas.

Level 3
The last area and the highest level of organisational learning is that of dynamic capabilities. This is where an organisation creates within itself the competencies to consistently renew itself and its business models. During this phase for instance an organisation might realise that the widgets the machine is producing is a commodity and find a different way to differentiate its value proposition.
In the context of South Africa a lot of activity has in the past occurred around the first level of learning by focusing solely on the service level agreement. The service level agreement has become the mechanism for an organisation to know if it is improving or not. Unfortunately most supplier development efforts was done through penalties or incentives. This limits the level of learning to the most basic level as the service level agreement is rarely used to discuss value adding opportunities or how the company does in relation to continuous improvement.

Due to the nature of Enterprise Development most Business Development Support companies in South Africa have differentiated themselves to become Entrepreneurial Support Companies. This has been beneficial to black owned South African companies that need to develop in order to compete against the large white owned companies, but has not instilled a culture of continuous improvement into the South African small business landscape.

Hopefully with the change in the codes to supplier development this could herald in a new focus on continuous improvement and management practices such as lean operational improvement that is focused on longer term supplier relationships.

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