In the sixth century, Pope Gregory identified the now famous seven deadly sins in order of their significance, starting with the least serious to the most serious: pride, envy, anger, avarice, sadness, gluttony and lust. And a couple of years ago, the Vatican updated the deadly sins by adding seven more modern ones to the list: polluting, genetic engineering, being obscenely rich, drug dealing, abortion, pedophilia and causing social injustice. A couple of the newer sins such as polluting and causing social injustice relate to corporate social responsibility, a concern today in procurement. Now I don't necessarily agree with the idea of deadly sins nor am I endorsing any specific sins listed above. However, inspired by the idea of sin and the need for some light summer reading on this blog, I decided to create my own list of the seven deadly sins of supplier management.
- Failing to do your homework. This includes failure to do sufficient financial and business due diligence before selecting suppliers; not looking extensively enough for potential sources; deciding to outsource internationally without prior international experience or a solid structure in place.
- Focusing on price. Price is an important consideration, but it isn't the only one. Quality, delivery, responsiveness, etc. are needed, too. Pressure on purchasing makes it hard not to fixate on price.
- Relying on too few suppliers. While it is good practice and cost-effective to not deal with too many suppliers, working with too few has its risks. Dependence on one source can reduce negotiating leverage and increase risk if the supplier develops any big problems.
- Putting supplier contracts out of sight, out of mind. Signing a contract is a beginning, not an end. Contracts need to be periodically reviewed to make sure they are being followed and that the supplier isn't drifting away from the terms they signed up for.
- Failing to communicate expectations. Expecting suppliers to perform a task or provide a product without is impossible without your fully defining and communicating what the requirements are. Expectations should be completely clear in the documentation of a service or product specifications and in the area of performance. To paraphrase Lewis Carroll, if you don't know your expectations, suppliers will take any path and may not get there.
- Falling in love. This is the sin of selecting a supplier based on personal rather than commercial reasons. It can lead to poor performance, overlooking poor performance, ethics breaches and no incentives for the supplier to improve.
- Not performing risk analysis and risk assessment, including not putting contingency or mitigation plans in place for disruptions at suppliers after they're chosen.
I'm sure that you'll have more to add.