Over £597M* was lost within
the UK housing sector due to supplier mismanagement or suppliers not being
proactively managed by housing organisations. Signing a supply contract or
framework agreement is just the start of a partnership that could last many
years.
The Failure to Manage
Supplier
Organisations that fail to
manage their suppliers will inadvertently allow service quality to decline at
the expense of increased costs. The contract or framework agreement service
specification will form the basis for the customer/supplier relationship and
establish an organisation's product and service offering.
The service specification
must prescribe the commercial, legal, or quality management system standards a
supplier must adhere to. However, the specification should not be so
prescriptive that it fails to stimulate service growth, as supplier
relationships become partnerships, or prevent solutions to supply issues from
being adopted to allow suppliers to avoid their obligations.
It is imperative that
organisations proactively manage suppliers to ensure that service standards are
achieved and even surpassed, whilst costs are minimised. Communication is
critical to achieving this and must be formalised so that an organisation and
its supply base can track and trace their progress towards maximum service at
the least cost.
Supplier Onboarding
The critical step of the
Supplier Onboarding process is for both parties to understand what each other
requires to maximise the service offered while minimising the costs and risks
related to operating under the contract or framework agreement.
Highlighting the critical
success factors is key between the parties in the initial stages of forming a
mutually profitable relationship. An initial meeting with the supplier
should be held to explore and ensure that the supplier fully understands the
following:
- Expected trading volume.
- Order process that will be used.
- Operational processes and
procedures to be used.
- How costs will be managed.
- Service Quality and Standards to be
achieved.
- Delivery process and lead time.
The critical issue for both
parties is to review and, where possible, eradicate any potential problem or
bottleneck that might occur to prevent both parties from maximising the value
that can be extracted from the contract or framework agreement.
Managing Supply Issues
National issues, such as an
inability to recruit staff, must be considered by an organisation and its
suppliers. Without staff, an organisation’s suppliers will not be able to
function to fulfil their obligations to their customers.
It would be unfair to sully a
supplier's reputation if its ability to service an organisation's needs was due
to a national inability to recruit, for example. The critical issue is for both
the organisation and the supplier to identify the key issues preventing the
fulfilment of service delivery.
Supplier management is a
crucial skill in identifying and overcoming issues that are often outside the
direct control of an organisation and its supply base. To overcome these
issues, both sides must form a partnership.
For example, if a company is
unable to employ staff, it is in the vested interest of both parties to seek a
solution that resolves the issue. There would be little to be gained from the
organisation transferring the issue to another supplier, only to find that the
problem continues because it is a national labour issue.
Meeting With Suppliers
Supplier meetings should be
held monthly for major suppliers (annual spend levels above £100K), quarterly
for intermediate suppliers (annual spend between £50K - £100K), and biannually
or annually for suppliers whose annual spend falls below £50K but whose service
is crucial for an organisation to function. The timing of meetings and
respective spend levels may vary between industry sectors.
A supplier must always deal
with urgent supply issues as they occur. However, severe non-urgent supply
issues should be noted between supplier meetings and form the basis of the
agenda for the next meeting to ensure that all service issues are captured and
dealt with. A supplier can only improve its service offering if it knows where
it needs to meet an organisation's expectations.
Supply issues must be
resolved to benefit an organisation's stakeholders, customers, and suppliers.
Setting impossible targets for suppliers to achieve will only increase costs or
lower an organisation's service offering. Organisations must be fair to suppliers,
but never let suppliers dictate their relationship with their customers.
It is common for
organisational contract or framework agreement managers to want to
avoid upsetting suppliers. However, assertiveness is essential when suppliers
try to obviate their obligation to resolve poor service levels. The contract
or framework agreement manager must ensure they hold the supplier to
account for their poor service, as failing to do so will inadvertently
contribute towards an organisation's poor customer service.
Using an independent
third-party mediator can assist organisations in overcoming supply issues where
the supplier is uncooperative or unwilling to meet their supply obligations. A
strong lead is required to manage issues.
Additional articles can be
found at Supply Chain Management Made Easy. This site looks at supply
chain management issues to assist organisations and people in increasing the
quality, efficiency, and effectiveness of their product and service supply to
the customers' delight. ©️ Supply Chain Management Made Easy. All rights
reserved.
*CIPS - 2019
