Pitfalls in supplier development

Pitfalls in supplier development - Supply Management...

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Supply Management Pitfalls in supplier development When the supplier can no longer meet the needs of the buyer: a) Bring the outsourced item in-house b) Change to more capable supplier c) Help to improve the existing supplier’s performance For low value adding, non strategic capabilities the cost of changing new suppliers is low, and switching might b the best option. At the other extreme, when an underperforming supplier provides an innovative product or process technology the buyer might protect the potential advantage and acquire the supplier. Average manufacturing firm spends over 50% of its revenues on purchased inputs Supplier performance will not be realised or sustained unless buyers recognise procurement and supply chain management as sources of competitive advantage and align their SCM strategy with their overall business strategy. Process map: seven steps to successful supplier development: a) Identify critical commodities (non-critical supplies, bottleneck supplies, leverage supplies, strategic supplies) b) Identify critical suppliers (which ones to develop, which ones to eliminate Pareto analysis) c) Form a cross functional team (a buyer must have its own house in order before expecting commitment and cooperation from suppliers) d) Meet with suppliers top management (sets a professional tone and reinforces the relationship) e) Identify key projects (set goals, which projects are achievable and which ones are not) f) Define the details of the agreement (metrics may include percent of cost savings to be shared, percent of quality, improvement to be achieved, percent of delivery, or cycle- time improvement desired, key product or service performance targets, technology
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Pitfalls in supplier development - Supply Management...

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