This afternoon, I'd like to welcome back Ariba's Jason Wolf and Kris Colby to Spend Matters. They've written a great -- albeit very long -- post on a curious issue that even non restaurant / CPG companies will enjoy reading. This is the second of a two-part series.
Proactive Spend Management Techniques to Reduce the Risk of a Public Relations Nightmare for your Company Close the Loop
Along with a structured approach during the sourcing process, it is imperative to follow through on the commitments between you and the supplier after selection. A structured supplier grading and feedback system through system-enabled scorecarding and process management will make it easier to drive continuous improvement via consistent and objective measurement. How can you get such a system in place?
- Be upfront -- It is now a common practice to introduce formal Risk Management / Supplier Performance Management programs in RFI's and RFP's.
- Invest the time to identify your most critical suppliers. Common factors to obtain this list include Spend, Criticality (impact on business, available competition, contract expirations...) and Product Risk
- Establish clear, well-defined and consistent performance criteria. Samuel Clemens once said, "If you want me to write a shorter book, give me more time". The same is true for the development of Performance Criteria and Performance Indicators
- Make the criteria, process and systems consistent and standardized across as wide of a base as possible. This enables the ability to compare like-suppliers in an objective, "apples to apples", manner. It also provides your organization with the ability to inform suppliers where they rank and reward good performance. Note that the ranking principle is particularly compelling in areas that can be sourced frequently where high levels of competition exist because previous scorecard results can be factored into subsequent sourcing decisions
- Include an established baseline of performance expectations which all suppliers should meet (with the understanding that Performance Improvement Plans or rebates will be necessary should a supplier not meet their goals). This should be clearly established during a supplier’s introduction to the program and closely managed using the data from the scorecarding process.
- Leverage exception-based alerts to quickly identify suppliers performing below the minimum baseline established by the company and to trigger a proactive response by your company's relationship owners.
Risk and Supplier Performance Management are rapidly evolving business functions that can produce and accelerate actionable results. But they're often tough to get off the ground. If this is the case for your organization, start simple. Focus on the four to five areas that have the capacity to disrupt your business the most and manage that risk (e.g. single lettuce or spinach provider).
No matter how robust the processes and systems you put in place, you will never completely eliminate the risk of a food safety incident. But with proper planning and documentation, you can effectively manage them and minimize any negative impact.
- Document your monitoring program and processes
- Compile bidder RFI/RFP responses and supplier scorecards
- Record alerts and action taken
- Retain information for litigation support
- Create a single repository for this data that is quickly and easily accessible across the organization
If you haven't experienced food safety issues, this may seem like a lot of work. But no company is immune to the threat of a crisis. By taking several small steps now, you can deliver tremendous value later should your company come under attack.
Spend Matters would like to thank Ariba's Jason Wolf and Kris Colby for contributing their thoughts.