Picture this. You are preparing for your next monthly supplier meeting and, although the latest performance data shows it has been hitting targets and it thinks it is doing a good job, the underlying belief in your organisation is the supplier is not performing well. How do you get beyond opinion to quantify this and gather the information you need to make a well-informed and fact-based decision about the future of the relationship?
We think there needs to be a clear line of sight between what is in the contract (and the contractual obligations of both parties), the performance metrics or key performance indicators (KPIs) and the relationship, including a 360 degree view or ‘perception’ of the relationship. In practice, this is rarely the case.
Over the past five years, our global studies on leading supplier relationship management (SRM) practice has revealed many organisations still lack a strong foundation upon which to build their SRM programme. Such a foundation will incorporate three key elements: contracts management, risk management and supplier performance management.
Here are six basic questions to test whether your organisation has a good foundation for your key supplier management initiatives:
- Can you put your hands on the company’s top 100 contracts?
- Are the contracts tiered to reflect the different supplier segmentations?
- Are there clear KPIs that link back to these contracts (are these mutual or two-way KPIs)?
- Is there a 360 degree feedback programme in place and is it consistent across your organisation?
- Is there a governance model that defines and links operational, commercial and strategic activities?
- Do you proactively manage supplier risk and innovation?
State of Flux has just closed its 2013 global SRM survey for both the buy side and sell side of strategic supply chain relationships. Work will now start on collating the results to produce the fifth annual report to be published mid-October.
The report will be preceded by a series of workshops taking place in London on 28 August and via webinar on 29 August, where participants in the buy side survey are invited to discuss initial findings. If you participated in the survey and wish to attend any of the workshops please contact Chloe Jansen at State of Flux at firstname.lastname@example.org
Alan Day is chairman of procurement and supply chain consultancy State of Flux