“When did you last have a discussion with your suppliers about their performance and how they bring innovation to your organisation?”
Mastering the art of supplier management involves a balance of great communication, rigorous performance monitoring, relationship building and proactive risk and contract management. By avoiding pitfalls by implementing Lean Tree’s suggested best practices, we have seen organisations, and their suppliers thrive.
A common observation we witness with clients is one of complacency. We are all time-precious but making the effort and having a structured approach to collaborating with your suppliers is fundamental to the benefit of your organisation and your supplier’s success.
Lean Tree’s Six Recommended Best Practices:
- Have Regular Discussions & Build Strong Relationships. Having consistent communication with your suppliers is crucial! Target having regular service reviews to build relationships, not only when you experience problems. Ensure you have an agenda for these meetings that allows suppliers to share their market awareness of your business and their area of expertise, give them the opportunity to show you innovation.
- Do Your Suppliers Adapt & Change With You? Are They Flexible? Don’t always have a conversation with your suppliers when things aren’t going well, keep them on board with your business targets. You never know they may be able to help you with no additional cost. In our experience, suppliers are willing to be adaptable when asked to make changes to their offer.
- It’s Not Always About Price & Cost Reduction. Costs and the value you get out of your supplier are key metrics, but we recommend you also have measures that track how they drive continuous improvement. In our eyes it’s more about how they provide you with cost-effective solutions. For example, you could implement a Key Performance Indicator (KPI) that measures innovation and how a supplier removes inefficiencies and technical debt.
- Competitive Vendor Negotiation. Don’t be afraid of asking (or challenging) your existing supplier to adapt their commercial model, build in some flexibility to review this when you author any agreement. We recently supported one of our clients to have a fair but improved offer with their incumbent supplier reducing their costs by half.
- Who Are Your Current Supplier’s Competitors? Do some market research to see who else is offering services in their space. What are the benefits they could offer to your organisation; do they have a history of success in your sector? It often costs nothing to have a presentation of capability from a new supplier, and you can use this is any forward negotiation without having to engage in a more consuming assessment.
- Consider Supplier Segmentation. We recommend building sustainable partnerships with key strategic suppliers to obtain the best value possible. Focus on suppliers that have strategic value or those that are key to your operational needs need a higher level of focus than others.
Lean Tree’s Takeaway for Successful Supplier Management:
- Communication is crucial: Make sure you don’t only engage with your suppliers when things don’t go to plan. Having regular, clear communication prevents misunderstandings and fosters a collaborative environment.
- Set and measure goals: Ensure your suppliers have clearly defined targets and you conduct regular performance reviews validate that both parties are aligned and working towards common objectives.
- Build a good relationships: Strong supplier relationships can lead to better cooperation and innovative solutions.
- Don’t be complacent: Don’t become overly comfortable with your supplier base and the relationships you have with them. Target reviewing their offer and support capabilities every year and not just when the contract is due to be renewed.
- Risk management: Allow your supplier to have visibility of your organisational risks, you never know where they may be able to support. It is also good practice to have a suitable contingency plan in place to minimise any supplier changes.
- Contract management: Regularly review your commercials, don’t always wait for a renewal to be the reason. Ensure KPI’s are accurately detailed within these documents, enforceable contracts prevent legal issues and ensure mutual compliance.
- Don’t always focus on price: While price is an important factor, choosing suppliers solely based on cost can be detrimental. Quality, reliability, and service should also be weighed heavily. A supplier offering the lowest price may result in lower quality, delays, or poor service, which will ultimately affect your business.
Need some Support?
If you need some assistance with reviewing your supplier portfolio and giving you some strategic thinking, then get in touch to hear how Lean Tree can contribute to improving your supplier relationships.
