Recent reports indicate that the UK housing sector suffered a loss of over £597 million* due to supplier mismanagement or a lack of proactive management by housing organisations. Organisations that fail to manage their suppliers risk declining service quality and increased costs. Signing a supply contract or framework agreement is just the beginning of a long-term partnership that could last many years.
Establishing a strong organisation/supplier relationship based on a precise supply specification outlined in the contract or framework agreement is essential. This supply specification should define a supplier's product and service offering while also setting the standards to which suppliers must adhere.
The Importance of Supply Specifications
The supply specification should include clear commercial, legal, and quality management standards to ensure suppliers meet an organisation's requirements. This will provide a basis for measuring supplier performance and ensure they deliver the services according to the agreed terms.
It is crucial to ensure that the supply specification is not overly prescriptive to prevent its criteria from hindering service growth as relationships between suppliers and organisations develop. The supply specification should not limit the adoption of solutions to supply issues, which could allow suppliers to avoid fulfilling their service obligations.
The supply specification should be flexible enough for suppliers to develop innovative solutions while meeting the agreed service and supply standards. This will help to build stronger partnerships between suppliers and organisations, leading to better service quality and lower costs in the long run.
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 track and trace their progress towards maximum service at the least cost.
Supplier Onboarding
The supplier onboarding process is a crucial step in establishing a successful partnership. During this process, both parties must take the time to understand each other's needs and requirements. This understanding will enable both parties to work together to optimise the service offered while minimising the costs and risks associated with operating under a contract or framework agreement.
Each party must be clear about their expectations and needs to achieve this. This includes understanding the scope of work, the deliverables, and the timelines involved. It is also essential to have a detailed understanding of each party's roles and responsibilities and any performance metrics that will be used to measure success.
Establishing effective communication channels and protocols during the supplier onboarding process is crucial. This entails identifying primary contacts, scheduling regular meetings, and implementing a reporting system to address issues or concerns.
Organisational Needs and Requirements
By taking the time to understand each other's needs and requirements, establishing clear communication channels, and defining roles and responsibilities, both parties can work together to successfully onboard the supplier and establish a long-term, mutually beneficial partnership.
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.
Supplier Service Issues
To ensure that both parties can maximise the value extracted from the contract or framework agreement, it is critical for them to carefully review and eliminate any potential problems or bottlenecks that may arise. They should adopt a proactive stance in identifying and resolving any possible obstacles hindering their ability to fulfil their mutual responsibilities.
National issues such as the inability to recruit staff are fundamental to consider, as they can significantly impact an organisation's and its suppliers' ability to deliver high-quality services. It is, therefore, essential for both parties to carefully evaluate any such issues and devise a plan for addressing them.
It is also essential to recognise that national issues, such as labour shortages, are outside the control of any individual organisation or supplier. Therefore, it would be unfair to blame suppliers if they cannot fulfil their obligations due to such an issue. Instead, both parties should work together to identify the problem's root cause and devise a plan for addressing it.
Effective supplier management is critical to identifying and overcoming issues beyond the direct control of an organisation and its supply base. This means that both parties should work together to develop a partnership approach to problem-solving, focusing on identifying and addressing any issues that might prevent them from delivering high-quality services.
If a supplier cannot employ staff due to a national labour shortage, it is in both parties' best interests to collaborate to resolve the issue. This might involve exploring alternative recruitment strategies, working with local government to address the underlying causes of the labour shortage, or even considering alternative service delivery models that do not rely on traditional staffing arrangements.
Supplier Management Review
To succeed in supplier relationships, it is essential to have a mindset of collaboration and be ready to tackle any obstacles that prevent organisational/supplier relationships from developing to their full potential. Through a proactive and cooperative problem-solving strategy, both parties can guarantee the delivery of best-in-class services that cater to their organisations' requirements.
Monthly supplier meetings should be conducted for significant suppliers with an annual spend above £100k. Quarterly meetings should be scheduled for intermediate suppliers with an annual spend between £50k - £100k. Meetings should be held biannually or annually for suppliers with a yearly spend below £50k but whose service is crucial for organisations to function. The timing of meetings and respective spending levels may vary between industry sectors.
A supplier must address urgent supply issues as they occur. However, severe non-urgent supply issues should be recorded between supplier meetings and used to form the agenda for the next meeting. This ensures that all service issues are captured and dealt with. A supplier can only improve its service offering if it knows where to improve to meet an organisation's expectations.
Supply issues must be resolved to benefit an organisation's internal and external stakeholders, including 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 the organisation's relationship with their customers.
It is common for organisational contract or framework agreement managers to avoid upsetting suppliers, but assertiveness is essential when suppliers try to avoid their obligation to resolve poor service levels. The contract or framework agreement manager must hold the supplier accountable for their poor service, as failing supplier service standards will inadvertently contribute to an organisation's failure to meet its customers' requirements.
Using an independent third-party mediator can help organisations overcome supply issues when the supplier is uncooperative or unwilling to meet their supply obligations. A strong lead is necessary to manage the problems in such cases.
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