Spend Matters welcomes another guest post from Jim Kiser of GEP.
I remember someone mentioning in a supplier management planning meeting that “we need to make sure our suppliers are working for us, not the other way around.” Then it really hit me that most often procurement professionals don’t use an opportunity to visit with key suppliers and focus on gathering key data. Even more so, it is not used to understand a supplier’s real capability for creating innovation and continuous improvement. Routine visits are usually set up for contract disputes, project starts, quality issues, or audits of current processes. Procurement resources need to develop a plan, one that involves the use of methods to uncover cost savings opportunities and productivity gains. Before meeting a supplier, it helps to do a financial diligence check on their health. Read a 10K report if they are a public company, and trade articles on productivity or revenue and/or any DUNS report you can access.
Touring a supplier’s facility can give a buyer a sense of how efficient the operations are being managed by observing areas such as:
- Material or service capacity or resource shift utilization
- Quality issues
- Financial issues
Remember it is important to plan whom you are meeting, what questions to ask, and who from your organization should participate in the supplier visit. Before meeting with a supplier, make sure you have an agenda prepared and sent over to the supplier prior to the meeting. It is important that you also get their understanding about the objectives of your team’s visit. Ensure that your colleagues from engineering, marketing, operations, finance, etc., are briefed as to what their role is and why it is important. In order to gather the most effective information during the visit, you will more than likely meet with the department heads in the areas you would like to review. Your team’s ability to prepare and develop questions for key discussions with a supplier’s internal leaders will not only create an expectation level, but will also provide a platform for gaining insight into how the supplier manages and coordinates their business from many functional departments.
Initially, one of the things that will make the visit more efficient is to have a supplier provide you with an overall business overview or “state of the operation.” How is their current state and what are their forward plans for the organization in cost management, growth, innovation, quality, service, or any new industries served?
Topics to cover could include the following:
- Plans for business - short, medium, and longer term
- Service improvement plans or customer service management
- Sales or marketing plans
- Performance gains or plans for improvement in areas
- Facility or operational plans
- Processes improvements or controls for business and technology
- Innovation for products or service
- Risk management plans and current processes
- Cost management and other key value improvements
Arranging a well-organized supplier meeting and developing key questions that team members will ask the supplier’s management team about specific concerns or interests will allow for your team to gain insight and knowledge into savings and value improvement areas. Also, it will help you find out if the supplier is financially and operationally healthy and, if not, what the implications for your relationship are. Ultimately, uncovering as much information as you can will help allow you to develop a strong sourcing strategy that will be part of your team’s future strategic plans in future years.
For more interesting thinking on procurement, visit the GEP Knowledge Bank.