Over
£597M* was lost within the UK housing sector due to supplier mismanagement or
suppliers not being proactively managed by housing organisations. Signing a
supply contract or framework agreement is just the start of a partnership that
could last many years.
The Failure to Manage Supplier
Organisations
that fail to manage their suppliers will inadvertently allow service quality to
decline at the expense of increased costs. The contract or framework agreement
service specification will form the basis for the customer/supplier
relationship and establish an organisation's product and service offering.
The
service specification must prescribe the commercial, legal, or quality
management system standards a supplier must adhere to. However, the specification should
not be so prescriptive that it fails to stimulate service growth, as supplier
relationships become partnerships, or prevent solutions to supply issues from
being adopted to allow suppliers to avoid their obligations.
It
is imperative that organisations proactively manage suppliers to ensure that
service standards are achieved and even surpassed while 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
critical step of the Supplier Onboarding process is for both parties to
understand what each other requires to maximise the service offered while
minimising the costs and risks related to operating under the contract or
framework agreement.
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.
The
critical issue for both parties is to review and, where possible, eradicate any
potential problem or bottleneck that might occur to prevent both parties from
maximising the value that can be extracted from the contract or framework
agreement.
Managing Supply Issues
National
issues, such as an inability to recruit staff, must be considered by an
organisation and its suppliers. Without staff, an organisation’s suppliers will
not be able to function to fulfil their obligations to their customers.
It
would be unfair to sully a supplier's reputation if its ability to service an
organisation's needs was due to a national inability to recruit, for example.
The critical issue is for both the organisation and the supplier to identify
the key issues preventing the fulfilment of service delivery.
Supplier
management is a crucial skill in identifying and overcoming issues that are
often outside the direct control of an organisation and its supply base. To
overcome these issues, both sides must form a partnership.
For
example, if a company cannot employ staff, it is in the best interest of both
parties to seek a solution that resolves the issue. There would be little to be
gained from the organisation transferring the issue to another supplier, only
to find that the problem continues because it is a national labour issue.
Meeting With Suppliers
Supplier
meetings should be held monthly for major suppliers (annual spend levels above
£100K), quarterly for intermediate suppliers (annual spend between £50K - £100K),
and biannually or annually for suppliers whose annual spend falls below £50K
but whose service is crucial for an organisation to function. The timing of
meetings and respective spend levels may vary between industry sectors.
A
supplier must always deal with urgent supply issues as they occur. However, severe
non-urgent supply issues should be noted between supplier meetings and form the
basis of the agenda for the next meeting to ensure that all service issues are
captured and dealt with. A supplier can only improve its service offering if it
knows where it needs to meet an organisation's expectations.
Supply
issues must be resolved to benefit an organisation's stakeholders, 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 their relationship with
their customers.
It
is common for organisational contract or framework agreement managers
to want to avoid upsetting suppliers. However, assertiveness is essential when
suppliers try to obviate their obligation to resolve poor service levels.
The contract or framework agreement manager must ensure they hold the
supplier to account for their poor service, as failing to do so will
inadvertently contribute towards an organisation's poor customer service.
Using
an independent third-party mediator can assist organisations in overcoming
supply issues where the supplier is uncooperative or unwilling to meet their
supply obligations. A strong lead is required to manage issues.
*CIPS
- 2019
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