A CHECKLIST FOR REDUCING SUPPLIER FAILURE

Do you depend on a key supplier?  Can you say yes to all these questions?

Understand your supplier

· How much do you really know about your suppliers?

· What evidence do you have to support your appraisal of their financial / legal / technical status?

· When was the last time you verified or validated the evidence?

· Are they operationally stable?

· What is their position in their own market niche, segment or sector?

· What do their competitors think of them?

· How resilient is their own downstream supply chain and how do you know?

· How will you know if the position changes?

Understand your dependence on your supplier

· What role do they play in your business?

· How dependent are you on them?

· What will it cost you if they fail?

· Do you have a contingency plan?

· What are the alternatives and how would you make a change?

Let your supplier know about you

· How strong is your relationship with your suppliers?

· How much do your suppliers know about you?

· Have you shared your business plan with your suppliers?

· Would they know enough about your business to recommend new services and products that could add value?

Have good information

· Do you have a strategy for managing supplier information?

· Is the information your suppliers provide reliable and how do you know?

· What evidence do you ask for in support of the information supplied?

· Is it up to date and can you access it readily?

· How often do you review it?

· Do you have an early warning system?

Think risk

· How often do you scan the landscape in which you operate?

· What do you do with the data, information and knowledge acquired?

· How have you assessed the operating risk to your business?

· How resilient is your supply chain and when did you last check?

· What are the sources of risk to your supply chain, e.g. downstream demand, upstream supply, environment, etc?

· What are the risks to your supply chain and do you understand how they could impact your business?

· How effective are you at identifying, assessing and controlling risk?

· When were your business continuity / disaster recovery plans last tested and did they include your supply chain?

If you had a problem answering these questions  or you would like a review of the risk and resilience of your supply chain by consultants who have provided these services in both the public and private sectors please  contact us

The dangers of multi-sourcing

This article by Jonathan Cooper-Bagnall, head of sourcing consulting at PA Consulting appeared in the Independent on 10th November 2009.  it illustrates very well the challenge of making performance meaningful!

“Outsourcing is back on the agenda, with a multiple-supplier model. But as Jonathan Cooper-Bagnall says, a holistic approach is vital

The last recession, in the early years of the last decade, fuelled considerable debate on the value of outsourcing. Many organisations saw it as an opportunity to secure cost reductions by awarding large and often complex outsourcing contracts to the world’s leading service providers. Although outsourcing was not a new phenomenon, the scale of deals signed, the number of jobs moved to offshore locations, and the speed of the change, provoked concern as to whether this was sustainable and appropriate.

Today, the outsourcing debate is raging again. Public and private sector organisations are looking to strip more costs from their operations by further outsourcing and offshoring. Many already have experience of outsourcing, but that experience has been mixed. The scale of the earlier outsourcing and offshoring has proved sustainable. However, some contracts have not delivered as a result of rushed contract execution and underinvestment in the transition to new suppliers, and the management of those suppliers. Those mistakes need to be avoided this time round.

Any organisation considering outsourcing needs to answer the question of how the delivery of operations can be restructured so that it takes advantage of the outsourcing provider’s skills. According to PA’s 2009 International Outsourcing Survey, organisations are planning to break up the large, complex contracts and move to a set of smaller contracts with multiple suppliers. The perception is that this will deliver much-needed cost reduction, and that this multi-sourcing approach enhances competition and offers a more flexible and agile delivery of operations…..”

More at this link

How to achieve a successful relationship with your suppliers – A Checklist

In a time of financial stringency a good relationship with your supplier becomes much more important.  Remember, if you are tempted to coerce them into reducing prices, you have a direct interest in their survival in the market place,  Maintaining a good relationship may be a means of ensuring that you both survive and that can’t be bad.  So had do maintain you key relationships with suppliers.

1. Make it a two way relationship! Seek to create value for both of you in terms of lower costs, reduced risks, greater efficiency, better quality, innovation and logistics – work together to improve.
2. Improve communication! Invest in meetings with your suppliers that extend beyond the contractual and service issues.  Get their feedback on how easy you are to do business with and respond positively.  Give feedback to them.
3. Segment you suppliers – categorize them! Determine with which of your suppliers your require a relationship that is  tactical (short-term/ad hoc), approved (occasional), preferred (more frequent) or strategic ( you have a business dependency on them).  Determine which are the most critical for your business and concentrate your relationship building efforts on them.  But it will be useful to check ( with care) if they see things the same way – you may get some interesting answers!
4. Ensure you have senior sponsorship! For your strategic suppliers it is a real plus if CEOs of client and supplier organizations know each other.  If you can align the strategic objectives of both organisations, you can strengthen both
5. Align information, roles, responsibilities’ and processes! Be clear about who is responsible for what on both sides of the relationship and how the relationship will be managed.  Flexing your standard processes to simplify the relationship with your key strategic suppliers can pay huge dividends.  Ensure your information systems and technology support the relationship you want to have with your suppliers.
6. Develop the right skill set! Relationship management requires a different skill set to that traditionally found in contract management.  Communications and positive influencing skills require a new perspective!  You may need to invest  in training and possibly some change in personnel to get it right
7. Treat them fairly! If your cash flow allows it, pay their invoice quickly.  If you know you have an on-going need and a business plan that supports it, guarantee future values.  Be realistic with them about what the future holds for both of you and give them a forecast, if you can.
8. Measure the benefits! Putting a price on any relationship is difficult.  But having a  good relationship with your supplier has many hard and soft benefits for example faster speed to market!  You will also gain in innovation – a new source of ideas for   your  business as well as first rate information about potential changes in the market

Go for it!  Because what you should be able to achieve with a really good relationship is quality, optimum pricing and a more resilient supply chain.  All provide great value to your business!