PurchTips edition #135

Use these tactics for managing supplier relationships:

Supplier Performance Evaluation – Ask a supplier’s representative how she thinks the supplier is performing and you may hear “Great!” But what if you think the supplier is performing poorly? Who is right? You can’t tell without agreed upon performance standards. For your strategic suppliers, agree upon what to measure (e.g., percentage of orders delivered by their due date) and what the goal is (e.g., 95% on-time deliveries).

Idea Sourcing & Value Creation – Better profitability can come from ideas. You can greatly increase the number of good ideas by sourcing ideas from your suppliers rather than just from your company’s employees. Some leading organizations have systematic processes in place to collect ideas from suppliers, measure their impact, and reward suppliers for them.

Supplier Development – It’s logical that when you improve the capabilities of your company’s workforce, your company benefits. But even though suppliers now do work once done in-house, that logic hasn’t followed the work. Leading companies engage in supplier development – providing resources to improve their suppliers’ capabilities. This often involves training suppliers in methodologies such as Six Sigma or Lean, but really can be any collaboration that makes suppliers more capable of delivering benefit to your company.

A Joint Review of Purchase Costs – If you work for a big company, you have a lot of buying power – buying power that may be wasted if your smaller suppliers have 100% responsibility for buying all of the goods and services needed to provide their product or service to you. By jointly reviewing costs further down the supply chain, you may find opportunities where you can buy some goods and services your suppliers need at a lower cost, ultimately reducing your overall costs.

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