PurchTips edition #237

A good supplier management strategy not only includes working with suppliers to improve their performance, but also integrating with sourcing processes and communicating the strategy’s value to the organization.

But many organizations lack this holistic approach to supplier management. For example, while they are checking dozens of references, getting samples, and conducting site visits to vet new suppliers, sourcing staff may not be accessing information about great suppliers that they are currently doing business with.

“Your known, high-performing suppliers can be a better bet” than new suppliers, says Sherry Gordon, the President of the Value Chain Group, a consulting firm that specializes in supplier management process design and development. “A firm should make sure that people doing the sourcing have access to performance information about current suppliers.”

Gordon observes that “often supplier management and sourcing people can be in separate silos in the same organization with the sourcing people unaware of current supplier performance when they’re… putting contracts out to bid.” She says that both teams having access to a supplier performance management system “with a common source of supplier performance information can help break down that barrier so that you can use that information about current suppliers when evaluating who you’re going to choose” for new business.

As a supplier management strategy begins to improve the performance of suppliers and reduce the risk of sourcing decisions, Gordon warns of a common mistake: not sharing the results within the organization. “People in the procurement or supplier management area get so busy working with their suppliers [that] they kind of forget to tell anybody,” she says. “They should be communicating this up the organization [and] with other departments involved.”

Such communication “keeps increasing the support in the organization,” Gordon notes. “Keeping success as a secret is a sure way to undermine the [supplier management strategy] and lose support for it, which I’ve seen happen in a number of cases.”

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