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.
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