Supplier Performance – Has Complacency Set In?
Has complacency set in with any of your key suppliers?
Do you remember when you first became their customer?
Service was fantastic, or their products exceeded your expectations.
Wouldn’t it be great if every supplier continually performed the way they did at the start of the relationship?
Maybe your business is not as important to them as it once was.
If your supplier is growing steadily, they are most likely dedicating resources to newer customers to ensure they get them up and running profitably.
They may need more people but may not be able to hire them or justify the additional expense.
This shouldn’t be your problem but if you have noticed a rise in service or product issues perhaps it is time to thoroughly evaluate their performance.
Changing key suppliers is generally a challenging task.
I don’t believe that there is a downside to doing supplier evaluations.
Several of my clients went through this process recently and one ended up with better pricing and service from a new supplier.
The other motivated the incumbent to fix the performance issues. Their suppler also set in place an ongoing review process to ensure things stayed on track.
If you are getting frustrated with supplier issues, here is a starter list of questions to consider in evaluating their performance:
- How important is this service or product to your organization?
- How many years have they been a key supplier?
- How many service or product quality issues have occurred in the past year?
- Have there been any changes in scope versus the original agreement?
- Have there been unexpected service or product disruptions?
- Have any unresolved billing issues occurred in the past year?
- Has the supplier suggested that price increases will be needed at an upcoming contract renewal?
- Has there been a change in personnel servicing your account?
- Are alternative suppliers aggressively pursuing this business?
- How would you rate the importance of your business to these alternate suppliers?
- Do you know how important your business is to the incumbent?
The answers to these questions should give you the information to determine how much this is impacting profitability.
Understanding the profit impact and the risk associated with a change are key items to detail in making the business case that a change makes sense.
I also believe that you should consider the political impact of making this change.
I remember one particular situation in my career where a change looked to be warranted.
Unfortunately, solving the issue would have been good for my group but would have caused multiple issues for other groups in the company.
There was some good news in the end. The evaluation was used to put pressure on the supplier by senior management to fix our local service issues.
As I wrote earlier, I don’t believe there is a downside to completing thorough supplier evaluations.
Doing your homework will put you in a strong negotiating position.
There are price concessions and service improvements available if you ask.
Ask better questions, make changes and 2018 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