Developing excellent supplier relationships
“I’m the customer, you’re the supplier – get it right!” – the challenge of supplier relationships.
As leaders of change, we know this old fashioned attitude isn’t an effective approach when dealing with suppliers. It can lead to a series of unhelpful behaviours, such as tampering, and a degree of tension can develop between customer and supplier. It is a position that can be hard to come back from. It hampers your ability to work together on improvements and in some cases can make the future relationship potentially unsustainable.
The relationship you have with your supplier base is critical to the sustained success of your business – and theirs. Getting it right is imperative. The challenge is, how to get results when the processes you are working on extend beyond your sphere of internal influence and into their supply chain?
In addition, if your suppliers are not using the same tools and methods to make their work, work then the chances are that you won’t be speaking the same language. That can mean miscommunication, misunderstanding and lost opportunities.
Demonstrating continuous improvement to your customers
I’ve been having some interesting coaching conversations recently about this subject.
Some clients require their suppliers to demonstrate continuous improvement as part of a Service Level Agreement. They run a Dashboard, with a traditional traffic light approach, and are continually frustrated by the fact that their suppliers remain in the red for continuous improvement.
Should they try something different? Should they seek out new suppliers?
An additional complication can be when your supplier is significantly bigger than you, such as the UK-based retail client we work with, who has 150 retail stores but is supplied by huge, multi-national corporations whose turnover exceeds theirs by many millions of GBPs.
What do you do when you don’t have the buying power to demand the supplier improves?
How do you get started working with suppliers to successfully reduce waste and variation?
Do you know what you want to accomplish?
It’s important to be clear on what you are trying to accomplish. In most cases, we find there are 3 common scenarios which relate to cost, quality or delivery:
- Supply today. You have an urgent problem with a key supplier which is impacting your ability to supply your customer.
- Supply tomorrow. You have 1 or 2 suppliers who you want to extend your relationship with, built on the principles of continuous improvement.
- Supply for the future. You are looking for transformation of your extended enterprise and are ready to engage with your supply chain to achieve this.
In a recent case, a client I was working with had decided to focus on achieving results with what they described as 2 primary suppliers. The questions they were struggling with were:
- What do we need, as a team, to be able to do this successfully with the suppliers?
- How do we get started working with the supplier?
Are these the right suppliers?
Another way to think about this is to ask; “How do you know these are the right suppliers to be embarking on this kind of programme with?”
This same client decided to step a step back and broaden their thinking. They selected a larger set of suppliers to consider and together we looked at four criteria for each one:
- Supplier readiness – what’s going on in the supplier today – do we have a burning platform or are we looking at the opportunity to develop longer term improvement; how ready are they to assign resources to an improvement programme; how stable is the supplier; how stable is their supply; what risks to supply could result from their personnel taking on the responsibility of an improvement project?
- Supplier capability – what existing capability exists within the supplier for this type of work; how capable is the relationship with the supplier; how open are they to collaborating on improvements; what are the attitudes of the leadership team, how capable are they of supporting an improvement project?
- Supplier criticality – how critical is this supplier to the work we do; what other options do we have for supply; what impact will it have on us if we don’t improve their supply?
- Supplier dependency – how dependent on us is the supplier; what creates the dependency; what are the risks; what options do we have to mitigate the risks?
The client realised that whilst gut reaction was telling them which suppliers they should be focusing their attention on, they didn’t have sufficient data to support their theories.
The good news is that the tools and methods for working with suppliers to improve are no different to working on improvements inside your system.
The Improvement Cycle still applies and Selecting Priorities is the first step.
So when you are looking at the continuous improvement of your suppliers, here is what we recommend:
- Common language and thinking. Continue to apply the thinking and methods yourself and support your supplier as they develop their understanding of the same tools and methods.
- Establish and lead steering teams. Changing the way people work and how they are measured requires careful planning, deployment, conscientious and open feedback and, of course, learning from the experience. Efforts need to be directed to areas most likely to reward you both and an active steering team is required to lead this.
- Start small! Plan for results in 3 to 6 months. Once your supplier has achieved results, they can transfer the newly demonstrated ability to improve a small process into the capability of reducing process variation across the whole system.
- Write up the achievements. It is vital that the supplier understands and records the gains and the lessons as they are made and that their line management understand the need for reporting and publicity; their people should be required to record their results in an understandable manner as part of their jobs.
- Celebrate! Plan to have a Share Fair and celebration event with the supplier to report the results of their first improvements.
The art comes in developing the skills of your people to intervene constructively because, in effect, your people are acting as consultants to their suppliers.
This role requires different behaviours from those normally expected, both for them and their managers. Development for both requires specific training and coaching and will help you realise the benefits of successfully collaborating with your suppliers to improve your system and delight your customers.