Our fourth in a series about Procurement Policy addresses supplier
The graphic below is well documented. Once a contract is put in place, the level of attention and management dictates the amount of value preserved.
Three Typical Paths
1. No Action - Believing the contract will manage itself, with no involvement or oversight, eroding contract value over time.
2. Performance Tracking - Putting mechanisms in place to measure agreed upon outcomes, preserving contract value.
3. Supplier Management - Developing a robust strategic plan to continue to foster value creation with key suppliers to increase the contract value.
A Category Approach
Supplier Relationship Management is a proven method of enhancing value of supplier partners. However, it does not come without its related resource requirements. How can you determine the best level of attention needed for each supplier relationship?
As with sourcing, evaluate your supply base related to category . Develop a model that relates to your business goals and concerns. One such model considers the supply
Supplier Relationship Management Types
- Strategic - Invest in the relationship through shared goals and financial outcomes. Develop a governance structure that incorporates senior management within a reporting structure to monitor the relationship, facilitate decision making, and escalate issues.
- Leverage - Maximize Value through teaming on a mix of cost control and enhanced quality. Develop scorcards and period reviews to track key metrics and identify continuous improvement opportunities.
- Tactical - Focus on reduced costs through aggressive pricing and efficient purchasing methods. Automate this as much as possible. Through automated purchasing and reporting, manage these categories by exception.
- Bottleneck - Mitigate risk through strong terms and conditions and leverage end user expertise. Minimal relationship management is required.
By enhancing your supplier management practices, you will preserve sourcing contracted value and help your organization to spend smarter and grow smarter.