Recent
reports indicate that the UK housing sector suffered a loss of over £597
million* due to supplier mismanagement or a lack of proactive management by
housing organisations. Organisations that fail to manage their suppliers risk
declining service quality and increased costs. Signing a supply contract or
framework agreement is just the beginning of a long-term partnership that could
last many years.
Establishing
a strong organisation/supplier relationship based on a precise supply
specification outlined in the contract or framework agreement is essential.
This supply specification should define a supplier's product and service
offering while also setting the standards to which suppliers must adhere.
The Importance of Supply Specifications
The
supply specification should include clear commercial, legal, and quality
management standards to ensure suppliers meet an organisation's requirements.
This will provide a basis for measuring supplier performance and ensure they
deliver the services according to the agreed terms.
It
is crucial to ensure that the supply specification is not overly prescriptive
to prevent its criteria from hindering service growth as relationships between
suppliers and organisations develop. The supply specification should not limit
the adoption of solutions to supply issues, which could allow suppliers to
avoid fulfilling their service obligations.
The
supply specification should be flexible enough for suppliers to develop
innovative solutions while meeting the agreed service and supply standards.
This will help to build stronger partnerships between suppliers and
organisations, leading to better service quality and lower costs in the long
run.
It
is imperative that organisations proactively manage suppliers to ensure that
service standards are achieved and even surpassed, whilst 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
supplier onboarding process is a crucial step in establishing a successful
partnership. During this process, both parties must take the time to understand
each other's needs and requirements. This understanding will enable both
parties to work together to optimise the service offered while minimising the
costs and risks associated with operating under a contract or framework
agreement.
Each
party must be clear about their expectations and needs to achieve this. This
includes understanding the scope of work, the deliverables, and the timelines
involved. It is also essential to have a detailed understanding of each party's
roles and responsibilities and any performance metrics that will be used to
measure success.
Establishing
effective communication channels and protocols during the supplier onboarding
process is crucial. This entails identifying primary contacts, scheduling
regular meetings, and implementing a reporting system to address issues or
concerns.
Organisational Needs and Requirements
By
taking the time to understand each other's needs and requirements, establishing
clear communication channels, and defining roles and responsibilities, both
parties can work together to successfully onboard the supplier and establish a
long-term, mutually beneficial partnership.
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.
Supplier Service Issues
To
ensure that both parties can maximise the value extracted from the contract or
framework agreement, it is critical for them to carefully review and eliminate
any potential problems or bottlenecks that may arise. They should adopt a
proactive stance in identifying and resolving any possible obstacles hindering
their ability to fulfil their mutual responsibilities.
National
issues such as the inability to recruit staff are fundamental to consider, as
they can significantly impact an organisation's and its suppliers' ability to
deliver high-quality services. It is, therefore, essential for both parties to
carefully evaluate any such issues and devise a plan for addressing them.
It
is also essential to recognise that national issues, such as labour shortages,
are outside the control of any individual organisation or supplier. Therefore,
it would be unfair to blame suppliers if they cannot fulfil their obligations
due to such an issue. Instead, both parties should work together to identify
the problem's root cause and devise a plan for addressing it.
Effective
supplier management is critical to identifying and overcoming issues beyond the
direct control of an organisation and its supply base. This means that both
parties should work together to develop a partnership approach to
problem-solving, focusing on identifying and addressing any issues that might
prevent them from delivering high-quality services.
If
a supplier cannot employ staff due to a national labour shortage, it is in both
parties' best interests to collaborate to resolve the issue. This might involve
exploring alternative recruitment strategies, working with local government to
address the underlying causes of the labour shortage, or even considering
alternative service delivery models that do not rely on traditional staffing
arrangements.
Supplier Management Review
To
succeed in supplier relationships, it is essential to have a mindset of
collaboration and be ready to tackle any obstacles that prevent
organisational/supplier relationships from developing to their full potential.
Through a proactive and cooperative problem-solving strategy, both parties can
guarantee the delivery of best-in-class services that cater to their
organisations' requirements.
Monthly
supplier meetings should be conducted for significant suppliers with an annual
spend above £100k. Quarterly meetings should be scheduled for intermediate
suppliers with an annual spend between £50k and £100k. Meetings should be held
biannually or annually for suppliers with a yearly spend below £50k, whose
service is crucial for organisations to function. The timing of meetings and
respective spending levels may vary between industry sectors.
A
supplier must address urgent supply issues as they occur. However, severe
non-urgent supply issues should be recorded between supplier meetings and used
to form the agenda for the next meeting. This ensures that all service issues
are captured and dealt with. A supplier can only improve its service offering
if it knows where to improve to meet an organisation's expectations.
Supply
issues must be resolved to benefit an organisation's internal and external
stakeholders, including 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 the organisation's relationship with their customers.
It
is common for organisational contract or framework agreement managers to avoid
upsetting suppliers, but assertiveness is essential when suppliers try to avoid
their obligation to resolve poor service levels. The contract or framework
agreement manager must hold the supplier accountable for their poor service, as
failing supplier service standards will inadvertently contribute to an
organisation's failure to meet its customers' requirements.
Using
an independent third-party mediator can help organisations overcome supply
issues when the supplier is uncooperative or unwilling to meet their supply
obligations. A strong lead is necessary to manage the problems in such cases.
Additional articles can be found at Materials Management Made Easy. This site looks at the flow of materials to assist organisations and people in increasing the quality, efficiency, and effectiveness of their product and service supply to the customers' delight. ©️ Materials Management Made Easy. All rights reserved.
*CIPS
- 2019
