Supplier partnership is an integral part many procurement policy. However how do we measure these partnership and is it bringing to the buying organization benefit?
Partnership beside bringing in better competitiveness to the transaction in term of pricing, quality and delivery, also involve innovation and new ways of handling information, resolve situational problem and bringing added value to both parties.
As a buyer and decision maker in organization, i would want to see supplier and buying organization work out the parameter involve which will sustain the business relationship in the long term and these are:-
a) Supplier Performances which is a very basic condition to any organization. How can a supplier able to sustain it performances every year in term of delivery, pricing, excellent communication, quality control and able to understand the customers business.
b) Transparent costing which most suppliers, especially in Asia and certain extent elsewhere. As a buyer, you will need to be confidence with the cost you are given by suppliers. Counter check on pricing with new sourcing of vendors will help but this by itself is self defeating in any business partnership as the trust is been placed on a very thin line. I myself will want to check and see a genuine reporting of material usages on the part and the actual cost use. Labor cost and other overhead cost will be expected to contain variance but all i need to see will be a percentage figure which will be a industry average.
c) Offer Innovative New Design which keep up to the market trend. Suppliers who does this make them more valuable to any customer and as a buyer I always appreciate such suppliers and of course they is a take here of better value to the supplier in term of cost
and profit but if any supplier able to do this innovative things, they and the customer will be able to stay above compare to the competition
d) Supplier who can offer insight to their customer supply chain system and help to offer some improvement will be extremely valuable. These type of insight can be from mutual discussion on how to improve efficiency and their ability to take some measure to improve their customer performances and lastly i will value supplier which ......
e) Able to improve costing of their product. Most supplier when they begin to supply new material to customer will incurred investment of people and equipments assets and this sunk cost will need to be recover from the sales of the material to the customers. I would expect them to try to recover the investment in terms of number of months or few years depending on the cost of investment versus the expected sales. If the suppliers are able to reduce the cost and remove this element later after the cost has been returned, but maintain a very small portion of it for maintenance and improvement, these are the type of supplier we will tend to value most.
These five element need to be there most of the time and we will sure value such suppliers. However as a customer ourselves, we need to play an important role as well and these roles are as followings:-
a) Be transparent with your policy and keep our suppliers aware of happening in your organization as a assured supplier will be able to add more confidence on their part to support any buying organization.
b) Behave like a supplier. All business organization will have their own customers as well as their own supplier. Think what your customer will do for any action or reaction your organization take.
c) Offer analysis of your business situation and seek understanding for any expected slow down or increase in business to assure your supplier understand the situation. The first instance any supplier will react when they see a slow down in business is to suspect they have lost it or their customer in trouble. Preempted this thought from their thought.
d) Give ample lead time to ensure your suppliers able to act efficiently. One reason for cost to go up is due to the need to perform extraordinary tasks like overtime and secure expensive material to meet unexpected short lead time orders.
e) Pay on time.
Tuesday, 7 June 2011
Thursday, 2 June 2011
PASSIVE NEGOTIATION
Negotiation is an art of war in subtle form.
Sometimes, as a buyer, the position you are taking in negotiation will determine the strategy you will apply and the other party will also be on the prowl to carefully study your real position. If as a party involve in a negotiation, and you have done your thorough research on the issue and strength and weakness of your position and the opposition position,you tend to be either very confidence or you may be aware of the traps and hurdle you are going to face and adopt a cautious approach.
Undertaking a research to your negotiation case and be prepare will be the best defense or attack strategy you will choose to make.
What is passive negotiation strategy?
As the word "passive" by itself, it mean to be taking a quiet or low or no response strategy and keep all your thought to yourself. In passive negotiation, you may either participate in the negotiation by being a listener and reserve your statement of intend or proposal to a later stage. You may also not directly involve in the negotiation but are represented by your subordinates or appointed agent.
Sometimes this strategy may come as a lucky break.
Recently i am lucky enough to apply this strategy!
A particular supplier came calling for appointment with me and the key agenda was to propose a price increase. As normal to myself, i reserve any commitment to this proposal and let the supplier calling the rule of the game.
I let this matter to be digested by more then a week and ignore the demand.
But in the meantime, i ask my assistant to review other proposal and check if we can change the specifications of the material and demand for a review with other suppliers. True enough, a number of potential suppliers willing to propose better costing.
With this information, i ask my assistant again to write to this particular supplier that since there a demand on price increase, we have decided to review the specification and ask for a line review. They may lose the businesses if based on the costing, other suppliers are much lower then them with this new specification.
You know what?
They decided that they shall not take any risk and maintain current prices without any increase for the short term!
I did not say a word to them on this but uses a subtle strategy of attack later which caught them off guard. Seem the homework not properly research by them!
Yes, it seem catching the opposition off balance but in negotiation, the element of surprise is very important. It no benefit to bark but without a bite isn't it?
Sometimes, as a buyer, the position you are taking in negotiation will determine the strategy you will apply and the other party will also be on the prowl to carefully study your real position. If as a party involve in a negotiation, and you have done your thorough research on the issue and strength and weakness of your position and the opposition position,you tend to be either very confidence or you may be aware of the traps and hurdle you are going to face and adopt a cautious approach.
Undertaking a research to your negotiation case and be prepare will be the best defense or attack strategy you will choose to make.
What is passive negotiation strategy?
As the word "passive" by itself, it mean to be taking a quiet or low or no response strategy and keep all your thought to yourself. In passive negotiation, you may either participate in the negotiation by being a listener and reserve your statement of intend or proposal to a later stage. You may also not directly involve in the negotiation but are represented by your subordinates or appointed agent.
Sometimes this strategy may come as a lucky break.
Recently i am lucky enough to apply this strategy!
A particular supplier came calling for appointment with me and the key agenda was to propose a price increase. As normal to myself, i reserve any commitment to this proposal and let the supplier calling the rule of the game.
I let this matter to be digested by more then a week and ignore the demand.
But in the meantime, i ask my assistant to review other proposal and check if we can change the specifications of the material and demand for a review with other suppliers. True enough, a number of potential suppliers willing to propose better costing.
With this information, i ask my assistant again to write to this particular supplier that since there a demand on price increase, we have decided to review the specification and ask for a line review. They may lose the businesses if based on the costing, other suppliers are much lower then them with this new specification.
You know what?
They decided that they shall not take any risk and maintain current prices without any increase for the short term!
I did not say a word to them on this but uses a subtle strategy of attack later which caught them off guard. Seem the homework not properly research by them!
Yes, it seem catching the opposition off balance but in negotiation, the element of surprise is very important. It no benefit to bark but without a bite isn't it?
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