The South African marketplace is experiencing an increasing amount of companies that are delivering supplier development offerings. The decision around which supplier development company to use can often be overwhelming. Most ESD managers hope that that they will be able to outsource the development approach and be done with it. Unfortunately the opposite is true with regards to supplier development.
How customised should your approach to supplier development be?
In companies that have followed a Supplier Development approach in the developed world outside of South Africa the rationale for doing so has always been one of development due to the commercial strength of the relationship. Supplier Development would therefore start with the most important strategic suppliers or those suppliers that the company is linked most closely to.
Due to the fact that the rationale is commercially orientated the supplier development programme has clear goals in relation to the specific supplier that is being developed. The outcomes of the developmental process are not turnover or job creation, but rather increased profit due to an improvement in the baseline performance of the companies involved. The goal is customising the development of the supplier to highly technical specific requirements of the company. The goal therefore is to create a customised programme that will impact those specific requirements. In the process of strict supplier development you therefore rarely find that the personnel of the company doing the development is not involved.
There is however the above more specifically around supplier development work that is not focusing on the core areas of a business. In the case of South Africa exactly the opposite of the above mentioned is currently taking place. Enterprise Development or the current migration to Supplier Development occurs in the companies that are peripheral in nature or who will not impact on the day to day operations. Due to the fact that the focus is on job creation and increase in turnover, companies seek to outsource the supplier development functions to those companies that seem to be able to deliver on these criteria. For this reason companies seek to choose one company that would deliver all their supplier development needs.
In some cases ESD practitioners believe that the best option is to pair one small supplier with another larger supplier and hope that, somehow, skills transfer between the two companies. This is a very poor approach if both companies are competing with the same goals and courting, for that matter, the same customer.
Unfortunately very few companies in the South African landscape have the complete spectrum of delivering solutions to all the different supplier development needs that a company might have. This leads to the following scenarios:
Supplier Development Cost Decision Matrix
Most companies in the ESD field have gone about molding their programmes around the needs in the Enterprise Development arena which caters quite significantly to the generic approach to development.
In the case of supplier development there is a strong need to customise the supplier development programme, and the better you wish to make the programme the more you will require the input of the end users that will be using the suppliers offering. Your chances of running a good supplier development programme is limited if the KPI’s of the end user is not tied to the programme and becomes almost nonexistent if the end users are not involved in the programme. Be further aware that every good supplier development programme requires a dedicated project manager that can handle a certain amount of projects. Make sure that this is budgeted into the process.
Obviously there are supplier development offerings out there that might fall somewhere within this matrix, but this provides a strong purchasing decision framework to anyone who wishes to make the decision of which supplier development companies to use.