The global recession has proved more than a cash flow problem for many businesses and it has forced us to change the way we do business; just being adequate is no longer good enough. We certainly invest more in keeping key customers happy and most consider closely the value we receive from our suppliers. So cutting costs and demanding more for less has become the norm but is it true that we get what we pay for?

What is it, how much does it cost and when can I have it? These questions have been replaced by disciplined supplier performance management which is recognised as having an important role to play in ensuring value is received from our suppliers. However it has seven problem trends that are consistent irrespective of the organisation or industry we are in. Generally businesses lack the discipline to deliver because supplier management is most often a disseminated responsibility and not a key performance indicator (KPI) for staff or a stand alone role.

Key to ensuring sustainable supplier relationships are the individual components of disciplined supplier performance management. However it all starts with identifying who your suppliers are and what is important for your business. Consider the following seven problem trends:

1. Cost Savings
2. Visibility and Transparency
3. Performance Management
4. Stakeholder Responsibility
5. Effective Supplier Intelligence
6. Contestability, Leverage and Consolidation
7. Contract Lifecycle Management

Cost Savings
How to achieve cost savings and reduce ongoing savings leakage from your business. Identifying cost saving opportunities, hidden costs, false economies, disruption, performance and service degradation, waste management and business assumptions made. It’s all about strategic sourcing initiatives and disciplines.

Visibility and Transparency
Obtaining organisational visibility and transparency of suppliers. Consider a centralised supplier and contract registrar that captures the organisation’s supplier engagements, merges information and transfers this valuable information into a single real-time repository for efficient administration, reporting, contract management, risk management and filtering.

The capability to balance risk and exposure against core business impact with processes amended to include awareness of the various forms of disruption, consider equitable terms in contracts, formal vendor performance measures, assessment risk management and escalation. Disruption is one of the biggest cost impacts to business. Disruption, in other words, is unscheduled delays and underperformance.

Stakeholder Awareness
In business we don't always know who our key stakeholders are but we should. So develop a strategic sourcing and vendor management policy that identifies and engages with the organisation’s stakeholders providing 'how to' reference guides to roles and responsibilities guides, that is both a support resource and a practical tool for your business.

Supplier Intelligence
Supplier intelligence and contract-lifecycle-management inefficiencies should be identified to capture the service offering, provide benchmarking and performance trends, key date alerts and visibility. Align the supplier performance with business expectation for engagement consistencies that reduce disruption and the risks associated with ad hoc or reactive supplier engagement.

Contestability, Leverage and Consolidation
Creating an environment that expects supplier excellence, this reduces supplier costs, mitigates commercial risks and up-skills existing resources to remove the expectation that 'someone else' is managing the organisation’s suppliers. An organisation is generally aware of their rights and obligations when it comes to the contacts, or they know what the intention of the agreement was. But they don’t always know when a contract is formed or worse when it has been materially changed.

Contract Lifecycle Management
Contracts have a beginning, middle and an end, so organisations need to know more than ever before about supplier under performance, risky suppliers, unproductive and ineffective relationships. They need to be in a position to manage compliance to contractual agreements, reduce risk and align procurement services with business strategy. They need to focus on “value”, not just cost. Understanding when a contract is formed, your rights and obligations and maintaining an informed decision making capability is critical for management and strategic competitive advantage.

Once a contract is formed it is essential for organisations to manage these supplier contracts and agreements in a cost effective way, seeking equitable terms and mitigation of commercial risk, capturing key date alerts and compliance requirements, negotiation, termination, consolidation and performance reviews.

In Summary
In order that we get what we pay for some dedication to bringing disciplined supplier management strategies to your business that aligns supplier performance with business expectation cannot be over looked.

Vendor Management is proud to be a leading provider of supplier performance management services. Further to this article, please take a few minutes to view our website and see how Vendor Management can help optimise your business’ outsourced supplier engagements, reduce commercial risk, reduce saving leakage and up skill staff. Call us today on NZ 0800 464844 and ask us about our RISK FREE services.
Cathy has more than 20 years of experience across a wide range of disciplines including Service Delivery, FMCG, IT, Banking and Telecommunications having worked with major New Zealand and dominant global organisations. Outsource management, cost saving and contract management strategies are areas she is both professionally and personally passionate about.