Our Tin Phone Approach to Supplier Development

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Tin Phone Supplier Development

You press the tin can as hard as you can to your ear.  Can you hear anything?  It’s rather muffled.  You cannot contain your excitement. Did you hear it right?  “I need to go and ask them” you think and you run as fast as your little feet can carry you to the other end of the wire.  Nope, you got the message dead wrong.  “Shucks, maybe this time I’ll hear it right,” and you run right back again to press the can even tighter to your ear.
As adults we look back at this now and we laugh with nostalgia at how silly we were.  But what if I told you that this process is still happening in many companies. Every day poor communication takes place between between customers and suppliers.  Even though communication is the critical first step to all our supplier development efforts we tend to ignore its importance. Let’s look at why this might happen in the B2B world and what steps can benefit the supplier development process.

Can you hear me?

Every day across the world Request for Quotes (RFQ’s) get sent out to suppliers.  Sometimes these RFQ’s happen a bit later in the decision making process, but most of the time this is the very first interaction companies have with one another.  Normally the buying company will share a morsel of information, while the supplying company will need to lay all their cards on the table.
Sadly, due to the one sided nature of this process, very little is really understood about the requirements and needs of the buying company.  An added factor is that up to this point suppliers have also only communicated the positive areas of the business.

Can you hear me now?

Once a partner company is selected they are given a contract.  The buying organisation might then decide to put a Service Level Agreement in place.  Please note that the word Agreement is quite deceptive.  For most of the cases this should rather be called a Directive.  This is normally the buying company’s way of making sure that the supplier sticks to the rules of the relationship.  Thou shalt not….
To make sure the directive has some teeth a few penalties will normally be included to sweeten the deal.  Ideally this process will be negotiated, but depending on the size of the buying company, you may be lucky if you get a chance to see the SLA before you need to sign for it.
Due to the fact that the performance of the supplying company is still to be tested, the SLA is based on one of two things.  Either the performance of a previous company or theoretical requirements.
In some cases suppliers can be slowly integrated into the supply chain adjusting the SLA to ever increasing requirements.  This approach allows supply chains to limit risk while testing the supplier’s capabilities.  Most supply chains, however, rather dislike the approach of having more than one supplier simultaneously and would rather choose to consolidate as far as possible.

How about now?

Once the joy of winning the contract has subsided, managers of the supplying company might suddenly become aware that they have to meet certain expectations.  Depending on the size of the contract, they might decide that those in their organisation responsible for implementing the contract require some indicators on how to implement it.
The problem, however, is that those responsible for selling the contracts rarely spend time with those implementing them.  In many cases, therefore, Key Performance Indicators once again become quite theoretical.
It is helpful to think of an indicator as something that will give us direction on a regular basis. Most Key Performance Indicators are, however, retrospective.   As an example let’s imagine a pilot flying a plane between Oliver Tambo and Heathrow.  Their dashboard should be a simple indicator right?  Except, let’s also imagine that the pilot looks at the dashboard once every nine hours.  Crazy right?  Yet still we like to call these archives of performance indicators. 
In all of this the front line operational personnel responsible for implementation are trying to figure out exactly what it is that they should do.

Did I hear you right?

Only once a supplier has been exposed to the culture and the operations of the buying company can they really start understanding the buying company’s requirements.  Even then the supplying organisation will need to differentiate between what is urgent and what is important.  (Unfortunately most of the attention is normally placed on the urgent.)
At this stage it is the rare supplier that is really able to start reflecting on the voice of the customer.  Most suppliers will never reflect on what it is they think they heard.  This step is of critical importance and should be the very first step in the supplier development process.  Sadly very few companies will ever internalise the voice of the customer, learn to listen clearly and act accordingly.

Let’s get closer!

It is good to know that the journey to internalising the voice of the customer can be significantly shortened.  Putting the correct systems in place will increase performance and drastically reduce costs.  Unfortunately most supplier development practices merely increases the transfer of knowledge but this does not necessarily lead to learning.  This added noise confuses front line operational personnel even more and is the cause of even greater variation in performance.   By implementing the correct communication channels and aligning the voice of the customer, we can significantly improve the supplier development process.
“Oh no!” you cry, “I can’t hear anything!”  But not to worry, you’ll make a plan.  Before long you are standing almost next to each other, shouting short sentences down the little tin can.  Isn’t it great, to be heard!

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