We conducted a supplier registration for one of our client who runs a chain of hotels and was experiencing rapid expansion. He was very happy with our work, though he felt that some of his suppliers who were doing a fantastic job in were disqualified. They were in vehicle maintenance, plumbing, suppliers of fruits and vegetables categories.
“We have worked with them for over three years and their rates are the best and they have really supported our business” Mr Malik said
“Let me review notes on their performance and then we can discuss” I advised him
Within three minutes I had reviewed notes generated from SRMhub and we went on with our conversation.
“Did a member from your procurement team ever visit their businesses?”
“Do their invoices have PIN and tax details?”
“No, I remember the finance manager has raised an issue a few times”
“Mr Malik, were you taking care of these suppliers?”
“I paid their cheques on time”
“You didn’t develop them as your business expanded and they don’t qualify to continue providing services in your business. They don’t have PIN certificates and that exposes you to the taxman as their invoices could be rendered invalid. Worse still they were not able to provide support for having a physical location of business premises” I concluded.
We agreed to communicate with them on issues raised on compliance, and the risk they exposed the business to. We would however invite them to re-submit their papers when getting additional suppliers in prequalified list as per the procurement policy we developed for the hotel.
Supplier development is the process of working with certain suppliers on a one-to-one basis to improve their performance and expand capabilities for the benefit of the buying organization. – Chartered Institute of Procurement and Supply.
Supplier development is about generating a new capability or competency in suppliers. By developing suppliers, organisations can generate competitive advantage. This can manifest itself in a new product for sale, a new streamlined process or the implementation of a new standard.
Suppliers are an enormous – and often untapped – pool for innovation, continuous improvement and cost reduction. By enabling this potential, companies can enjoy an enormous impact on the bottom-line.
Here are simple ways to develop your suppliers:
The easiest way to up-skill suppliers is to simply direct it. Communication can be facilitated on mass to suppliers, either by generic emails or through a supplier portal, but these are unlikely to create dramatic alterations.
Tailored communication, directly from supplier managers to account managers can more likely galvanize change. The clearer the expectations (with dated milestones and measurable deliverables) the easier it will be for suppliers to follow.
Driving supplier change is a lot about trust. It is important therefore that the dialogue is founded upon two-way communication. But talking suppliers through a program, sharing information and providing visibility into the product pipeline of the organization will help generate that trust.
Training comes in two forms. Firstly, remote training allows buyers to use on-line methods to convey new required standards or systems. This absorbs considerably less resource for both buyer and supplier, as travel is kept to a minimum, but the impact of such sessions can be questionable.
A second more direct education means is classroom-based learning. On-site sessions allow easy interaction between buyer and supplier, enabling clear communication and the formation of a development plan for the supplier.
These trainings can often be in turn outsourced to third-parties. Mr Malik would have helped his suppliers by training them on tax requirements when the finance manager raised it.
The motor industry does a fantastic job on site visits by their engineers to suppliers. Nissan, for example, will look to send a handful of engineers to visit suppliers upwards of four-times a month. For critical suppliers, Nissan engineers may be permanently resident.
On-site assistance can provide rapid implementation for a new capability – either in installing a new technology or implementing a new management practice – and can offer faster time-to-market than sourcing from a new supplier. Indeed, where your organisation possessing the know-how, the supplier can save significant management consultancy costs, which are savings that can be in-turn passed on to your organization. The on-site staff can also ensure that all developments are closely aligned to buying company policies and standards.
Developing your suppliers is best means to indicate to the supplier that your organization is committed to a long-term and effective relationship. Once they perceive the relationship is long term, they shall stop cutting corners to make a quick kill.