- 11
- JUL
- 2011
Procurement GPS: Reactive Supplier Development - free consultancy at your expense
Author: Ian George - Categories: Supplier Relationship Management, Procurement Strategy
The impact that poor supplier performance can have on your own organisation should never be underestimated. Studies have shown that as much as 20% of an organisation's costs are not only avoidable, but are a consequence of its suppliers' inability to get their own house in order.
Customers are becoming better at measuring the performance of their suppliers, but this often gets only as far as being translated into a formal request for an improvement plan or a reassertion of formerly stated targets. There is an old saying that continually weighing the pig doesn't make it fatter - if you want to change the result then you have to do something different.
The cathartic response is to want to punish suppliers for their disorganisation. We might think that if they ran their private lives the way they run their business they would either be in prison or an institution. Despite what we may sometimes think, suppliers don't deliberately go out of their way to let their customers down. The reality is that they are often doing their best, it just either isn't good enough or they don't really understand what we actually want.
Beating suppliers over the head with their problems needs to be replaced with an engagement that focuses on moving both organisations forward. Working with your suppliers not only resolves issues, it builds relationships and a standardised method of improvement. This is particularly important when we consider that most problems have root causes in both the customer and supplier organisation.
A good quality supplier development capability really is a competitive advantage from both the supply side (suppliers will want to learn from you) and the customer side (products and services will be competitive from both a cost and value perspective).
From a pragmatic perspective, supplier development is effectively free consultancy that you pay for. In most cases the potential losses to your organisation far outweigh the costs, such that the business case is a no brainer. Despite this, organisations still need to think carefully about where to place finite resources.
