To save costs and smooth processes many companies implement strict procurement and supply chain policies and procedures meaning the procurement or supply chain managers are increasing their influence. Increasingly, procurement and supply chain functions are being represented at board room level in companies, so ignore their needs at your peril.
Supply Chain & Procurement are your customers. Understand their needs
Gone are the days when the cheapest price won and the procurement manager was a feared demi god forcing suppliers to cut prices to the bone. A good procurement professional does not look at price as being the one and only criteria. Cheap often equates to nasty and often costs an organisation more in the long run.
“During 11 years of auditing customer/supplier relationships, I have undertaken thousands of face-to-face interviews and 99% of executives interviewed do not want the cheapest price. They are happy with a supplier charging a fair competitive price as they realise other things are more important,” says MacGregor.
To illustrate, a company may have an outstanding top of the range quality product, however if it cannot be reliably delivered on time this could cost the procuring company in the long run. Think about the cost implications of a stopped production line because a vital component is out of stock. Often a standard quality product delivered on time is preferred as it ensures the company’s processes are efficient.
Similarly, a supplier that has a bad reputation for making it difficult to claim on its warranties and guarantees, or not having appropriate skills and knowledge in house (even though the price is cheap), or is slightly unethical in its dealings. These could lead to the overall degradation of the procuring company’s processes making the company less efficient.
MacGregor advises evaluating a supplier company from the perspective of a procurement and supply chain professional.
“An assessment of a supplier company should rate its performance with its existing customers. Leopards don’t change their spots, so if a supplier treats its existing customers badly, it will probably treat you badly as well.
SuppDex developed a survey in conjunction with procurement professionals. They were asked what they wanted from a supplier that would make their companies more efficient and their requirements were consolidated into seven core areas. SuppDex developed a questionnaire around these seven core areas so a supplier’s performance could be assessed.
For more information on assessing prospective suppliers email Douglas MacGregor on douglasm@SuppDex.com