Tuesday January 3, 2012
Do many of your suppliers let you down, performing sub-optimally and embarrassing the sourcing team that selected them? We're seeing a strong trend amongst our larger clients to plan significant improvements to Supplier Relationship Management (SRM) activities during 2012.
These are predicated on improvements to the relationship leading to improvements in service, efficiency and therefore ROI from outsourcing.
Here are our top five ways clients are improving SRM:
If your department has multiple IT suppliers that have each been brought in to fill a specific role or need, but no-one has overall responsibility or time to manage them properly, how can you identify which ones are performing and which aren't. Until you know that, how can you decide which suppliers to give more work to and which to cut from your supply chain? If you understand what other services those good suppliers offer you could avoid costly procurement exercises.
Reducing the number of suppliers brings benefits on two sides:
- The supplier works harder and perhaps prices its offerings better to secure your business
- Your (or our) supplier management function has fewer relationships to manage and can achieve greater consistency of monitoring and service improvement
2. and 3. Communication and Active relationship management
If each of your Vendor Managers has too many projects on to adequately monitor all suppliers, you lose out and the supplier can't feed back to you in a timely fashion on potential service improvements or cost savings.
Frustrations can occur on both sides if a supplier is not integrated into your organisation so that they understand your business and goals. We know from experience that communication is key to ensuring a successful client and supplier relationship and enables you to build mutually beneficial partnerships.
Communication can only come from regular, systematic, governance of the contract and services, through regular service review meetings, reporting and a feedback cycle to your service improvement programme. This active relationship management differs markedly from where many organisations have concentrated in the past. Stop firefighting suppliers who cause problems to your business and ignoring the good ones - start actively working with the good ones to learn from them if nothing else.
SRM can too easily become a personal matter, with two equally good Vendor Managers having different opinions of one supplier. Drive out the inefficiency and subjectivness of personal opinion by systematising your SRM activities, allowing your team to run the process but imposing objective discipline on them. This avoids dependence on one person in your or the supplier team, and can make good relationships last longer, and root out the bad ones.
If you devise a process for SRM at the outset of the relationship, perhaps pre-contract, you'll monitor the transfer of risk or pricing actively rather than waiting until events force you to. Those objectives in the original business case for outsourcing should become living breathing parts of the suppliers' day to day activities.
5. Making contracts truly win-win
Research shows that clients are most satisfied when their outsourced supplier is earning its target margins. Make sure you measure it, for the supplier's benefit, not to minimise their margin.
Never considered outsourcing supplier relationship management?
MSM Software provides outsourced SRM by applying ITIL principles to guaranteed SLAs. We take sole responsibility or take the pressure off your team by adopting some of the routine and repetitive day to day elements of supplier management, freeing up your teams to focus on higher level strategic management of suppliers. Hybrid working suits many overworked clients needing to demonstrate rapid outcomes.