Supplier Relationship Management Guide and Tips

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Supplier Relationship Management
Have we overlooked the relate in supplier relationship management? Being privy to many interactions between buyers and suppliers I have come to realise that successful long term buying and selling relationships have a higher correlation with a management culture than any statistical measurement instrument or SLA. Over the years of sitting in various operational meetings between buying company representatives and that of the supplying company I have come to see how participation leads to respect, respect leads to mutual problem solving, which in return leads to continuous improvement and innovation. Below is an example of three major classes of relationships between buying purchasing representatives and their supply counterparts. I’ll be interested to know which one you think has the most positive impact on the bottom line.

 The Bad – I own your ass!

In stomps the buying parties procurement manager followed by the operational manager. Huddled in the corner is the supply companies representative. Normally you can identify this fellow by the cellphone that is plastered to his ear day and night. The topic of the hour – the breakdown that costs more than the supplying company will ever be worth. Hardly worth noting is the fact that numbers will be thrown about to the same degree as the decibels and profanities accompanying it. Seeing fear start to rise in the eyes of his opponent, the buying representative smells victory and ends the meeting. And so it is, over and over and over… The effect of this relationship is short term improvement with a long term downward spiral. I have been amazed at how many times this relational cycle has been repeated in various different forms expecting different outcomes after each iteration.

 The Ugly – Alternatively known as The Monologue…

“We are all gathered here, today, for a worthy cause, to discuss the nature…”  So opens another meeting in which one person delivers a message to the benefit of that person alone without having any form of engagement.
I have been surprised by how many variations of this meeting there can be and how little regards some people have for the value of time and the intellectual capacity of others. Do a short calculation and figure out how much that little meeting cost the company.  Was this worth it? My respect goes out to the person who is able to say: “Nothing to say today – well let’s get going!”  Unfortunately in relationships where there is no focus on performance improvement – there is no focus on performance improvement. Rather get everyone participating in the meeting to review their performance before the meeting starts and then discuss improvement rather than performance.

The Good – Going to the Gemba

Gemba is a Japanese term for where things (work) are taking place. The pride of my career was in a little cheese factory that worked with a group of suppliers on shift basis. I was amazed by the improvement that consistently took place here on this companies month to month KPI’s.  I spent a lot of time wondering what made this supplier so unique. It all became clear to me on the day I saw the buying companies operational manager walk the factory floor, look and touch the innovations that had been implemented by the supplying company, ask them questions, and shake the hands of the supplying company representatives while thanking them. By going to where things were taking place and respectfully interacting with the suppliers at their place of work the buying company representatives were able to inspire performance well above what any SLA could achieve.
In many organisations the maturity of the procurement team is measured by the savings opportunities exercised by the company, however companies that differentiate their value chains are those that focus on relating, rather than having a myopic focus on rationalising.