Skillfully Managing Supplier Relationships

PurchTips edition #152


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What Nuances Does Relationship Management Have?

One of the keys to maximizing the positive impact of a supplier relationship is "getting your own house in order." In other words, if your own systems, processes, and people are not up to par, you can adversely affect the supplier's performance.

Managing Supplier Relationships

Michael Massetti, the Vice President of Global Procurement & Quality for Tekelec, agrees, using a golf analogy: "If you're a 95 or 100 golfer and you get the latest, greatest Nike driver, it's certainly unlikely that your game is going to improve. I look at the relationship you have with suppliers similarly. If you're doing work with suppliers and you don't have processes that are consistent, that are sustainable, that execute the same way over and over again, it's unlikely that to ask them to perform very well in an uncertain environment is going to lead to very good results."

Massetti knows first-hand about looking internally to solve supplier relationship problems. Tekelec recently had some concerns about a supplier's delivery performance. Naturally, the tendency of internal customers was to blame the supplier. However, "when we started looking at the root cause of the problems, we realized that there were things on our side that were contributing to that lack of performance," he says.

"When we really started unpeeling the proverbial onion, we found out that there were some issues with our own forecasting process and how we were managing inventory," Massetti shares. But collaborating with the supplier and making changes internally "allowed us to improve the overall delivery performance remarkably."

Not all suppliers are equally important to your organization, so you shouldn't take the same approach to managing supplier relationships with each of them. For example, you wouldn't redesign a complex internal process to improve a relationship with a low-spend supplier of non-critical items. Massetti bases his team's approach to relationships on Tekelec's supplier stratification scheme that includes three tiers: Partners, Suppliers, and Vendors.

Tekelec's Partner relationships involve executive engagement, dedicated resources on both sides, scorecards to evaluate performance at least quarterly, and time and effort spent to develop the relationship.

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