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 can 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, 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.
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
