Welcome back to another installment of Whitepaper Wednesday here on the Purchasing Certification Blog. This week, I’ll be reviewing a whitepaper entitled “Vendor Capability Assessment & Development” from the Corporate Executive Board and Toolbox For Finance.

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This whitepaper revolves around a case study of a manufacturer – Cummins – which solved a problem of failing to select the right vendors for certain projects. This problem had three symptoms: sourcing employees had limited visibility into vendor competencies, vendors often overstated their competencies, and sourcing employees struggled to differentiate between similar vendors.

While most companies identify a need and then find vendors capable of fulfilling that need, Cummins was finding that their needs exceeded the vendor capabilities available in the marketplace. The first step in addressing this was to annually determine vendor capabilities needed when budgeting for certain projects was done. (Valium) Cummins would then share these capability needs with its supply base, who could develop the necessary competencies before they were actually needed.

Collecting data from vendors and internal resources, Cummins would then create a bubble chart for each vendor to illustrate their degree of competency for various capabilities. These bubble charts serve as a building block for a plan. Cummins holds annual meetings to set goals with the vendors and then holds quarterly meetings to monitor progrss.

The whitepaper features some interesting quotes from Cummins executives that laud the value of this type of collaboration. Here’s one that I found to be evocative: “We don’t track vendor competencies so that we can beat our vendors up when they fall behind. We track vendor competencies so that we can develop joint goals and strategies for future partnerships. We show our vendor where we want to go in coming years and what they have to do to be our number-one provider.”

What results has this approach delivered to Cummins? The whitepaper claims a “10% year-over-year reduction in application defects” though a graph shows this just from 2005 to 2006. It is not clear if the quality impact is a one-time hit or one that produces continuous improvements.

The whitepaper concludes with a decent – though subjective – supplier scorecard example. So, whether you want to study how to implement a vendor capability development program or just see some cool tools used by a real company, this whitepaper is worth downloading. You can get your copy from the Toolbox For Finance website (registration required).

Recommended Reading

Whitepaper Wednesday – A Negotiation Process
May 2010’s Dedicated Purchasing Student of the Month Is…
Commodity Price Forecasting: Why Do You Need To Be Self-Sufficient?
Preventing Surprise Supplier Surcharges
Corporate United’s SYNERGY Conference Is Next Week!