Identifying Supplier Alliance Candidates

PurchTips edition #56

 

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By Charles Dominick, SPSM, SPSM2, SPSM3

Picture of Charles Dominick, SPSM, SPSM2, SPSM3

How Do You Know Which Suppliers To Target?

A supplier alliance is a special, formalized relationship with a supplier - a relationship reserved for an extremely limited number of suppliers. It's characterized by collaboration that results in mutual successes not achievable otherwise.

You may pursue a supplier alliance to realize one or more of the following benefits:

  • To assure continuity of supply in a tight market
  • To achieve significant reduction in the cost of doing business, of which price is only one component
  • To attain a flexible and responsive source of supply when demand changes unexpectedly or dramatically
  • To access expertise that will contribute to innovation
  • To improve your organization's quality or operations

Deciding on alliance partners involves two variables: (1) difficulty of obtaining supply and (2) importance to your organization's mission. Here's one way to identify candidates for supplier alliances...Calculate Supply and Importance Scores for each major supplier as follows:

Supply Score Importance Score
1 Point if there are many sources for the product/service, short lead times, and predictable availability 1 Point if your organization could fulfill its obligations to its customers without the product/service
2 Points if there are few sources, occasional long lead times, and sometimes unpredictable availability 2 Points if the product/service supports the production of a product or provision of a service, but is not directly incorporated into the final product/service
3 Points if there are one or two sources, frequent long lead times, and always unpredictable availability 3 Points if the product or service is directly incorporated into the final product/service

Multiply these two scores together for a Total Score. Suppliers who have a Total Score of 9 are excellent candidates for supplier alliances. These suppliers warrant more attention, closer collaboration, and vision sharing for future success.

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