What challenges will you face to improve supplier performance?
Suppliers that have been in place for a long time – more than 5 or 10 years present one set of issues.
Single source suppliers present another layer of obstacles to consider if their performance starts to slip or their pricing is putting a big squeeze on your profits.
Newer suppliers tend to be eager to please. Especially if it has been a long process to obtain your business or gain a bigger share of it.
Imagine if all suppliers performed like they did at the start of the relationship.
Based on my experience the following internal issues should be considered first:
- Stakeholders complain about supplier performance but rarely are willing to cooperate fully with an initiative
- Do you have the backing of senior management to complete this review?
- Finding the time and resources to complete a thorough review and that includes all impacted groups
- Supplier performance information may be scattered across different platforms or not in digital form
- Resistance to change suppliers even when performance is slipping because of the work involved
- Is there reliable spend data to identify key categories to attack?
Let’s assume that you have the backing of senior management and a list of the key spend categories.
Here are some questions for you to consider in evaluating the performance of each suppler:
- How many years have they been a supplier?
- How do your stakeholders rate their performance today versus 3 or 5 years ago?
- How long has the key contact been in their role?
- How many locations do they supply or service?
- What percentage of the category do they provide at each location?
- Are there any documented issues related to quality, delivery, on-time performance or billing?
- Has an unexpected interruption in service or supply occurred during the relationship?
- If there have been issues, how many segments of the business have been impacted?
- Is their industry dealing with labor shortages?
- What is the historical cost trend?
- Have their competitors reached out to us recently or in the past couple of years?
- Have they offered any innovative ideas to reduce or control costs?
- If a change was needed, do we know the scale of the key factors?
- What percentage of their total sales does our business represent?
- How many of our competitors do they supply or service?
- How current is the financial information we have for them?
- Have you approached them about price concessions or increased levels of service?
If you released an RFP for this category, how competitive do you expect them to be in defending their current position?
Releasing an RFP may not be the best strategy but reaching out to known competitors on an individual basis may be eye-opening.
Recently, one of my clients was approached by a competitor to the key supplier in a large spend category.
Based on that the key supplier was contacted with concerns about changes in the scope versus the original agreement.
The supplier was very willing to discuss the issues and made changes to the service level.
So, all is well for now. My client let the competitor know that they will get an opportunity of the changes don’t stick.
All it took was a phone call expressing concern.
I have heard this same story many times.
I believe there are at least 5 key lessons here:
- Suppliers don’t want to lose good business
- Profitable clients and customers are hard to find
- There is a tendency to assume that things are fine if you haven’t heard anything to the contrary
- The supplier may not have realized how big the issues were to your company
- Your service or product issues may not have been reported up the chain at your supplier
So, where does that leave you?
This doesn’t have to be a long and arduous process.
I believe that a bit of digging in key categories can yield great results.
In my experience, every company has opportunities that haven’t been investigated.
It will all start by asking a few pointed inquiries.
Ask better questions, make changes and 2020 will be your best year ever.
Action Step: If you are uncertain where to start the process of change, a procurement professional like myself can provide guidance and expertise to help your organization achieve the results you want.
If you want to go explore this topic in greater detail, please contact me. I invite you to request 30-minute discovery conversation. In my experience the next step will be apparent at the end of the call. I never assume that what I have to offer will be right for everyone, so don’t expect a sales pitch. You can reach me at 973-936-9672.
If you would like to know more ways to reduce costs without changing the way you do business, simply give me a call or send me an email with your contact information and the best time to reach you.
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Until Next Time, I Wish You Great Success in Your Business and in Your Life