Early in my career I worked in a department that was responsible for the design,testing, sourcing and procurement of packaging materials. It was a great experience and introduction to so many aspects of the Supply Chain.
But one day one of my peers was fired. He was responsible for negotiating with the packaging suppliers. As it turns out he was taking kickbacks. When that was discovered and verified he was summarily dismissed. He went over to the dark side.
I never got the precise details but I don’t believe he could have got more than a few thousand dollars for his illicit efforts. More importantly he got a black mark on his resume, and in his life, that he could never erase.
That was my first lesson on the do’s and don’t of Supplier Relationships.
As we’ve chronicled on the Argentus Blog, it’s no secret that the world of Procurement is changing and fast. With automation, big data and burgeoning AI systems removing more and more of the profession’s “tactical” or “clerical” tasks, the Procurement report card is that companies are calling on their Procurement teams to be more strategic, more nimble, and more innovative.
They’re expecting their Procurement functions to deliver not just bottom-line cost-savings, but other sorts of value, adding to organizations’ overall competitiveness.
Procurement, you’ve come a long way, baby!
But a new survey of 200 C-Suite executives from a variety of industries and functions presents a rather dispiriting picture of the Procurement function today – or at least how it’s perceived.
As we come to the end of our 3rd year here at Supply Chain Game Changer it is time to publish our semi-annual 2019 Top 10 List.
First we want to thank our readers. Our audience and reach continues to expand with Supply Changer now being ranked as one of the Top 20 Supply Chain blogs in the world and one of the Top 15 Procurement blogs in the world. Both are record achievements for us.
Second we want to thank our guest contributors. With dozens of writers and articles we continue to fulfill our vision of sharing expertise and experience from all over the world.
We thank you for your ongoing support and ask you to continue to spread the word about Supply Chain Game Changer. There is truly something of value for everyone no matter what challenge you are facing each and every day.
Here we present our Top 10 list for the second half of 2019. Enjoy!
Where is procurement, outsourcing, sourcing, supply chain, and purchasing going? What is happening in the marketplace? What are companies thinking at the executive level and what type of actions are they taking?
First off, we will outline a few of our observations about what we are seeing first hand. Secondarily, we will include information from other procurement professionals and procurement firms about their experiences, what they forecast, and what they are seeing.
He’s only one and a half years old and is already, now, rather well trained. Sure, he has an occasional hiccup and puts his paws on a friend from over excitement, or pulls on the leash a bit too much as we approach the lake. But, all in all, my girlfriend and I (mainly her) have done a pretty solid job raising him.
Then again, we didn’t approach this whole dog ownership business with a ‘wilyl-nilly’ mindset.
In any company or industry that sells products the cost of the raw materials and components is often the single largest expense. Despite the magnitude of this cost however there is a wide range of focus put on managing this expenditure from proactive and strategic to reactive and tactical. This is all managed by either Commodity Management or Category Management.
In some cases there is a great level of planning applied before a single purchase order is placed. In other cases buying decisions are made subjectively and with very little focus. Further the experience in those buying these goods can vary significantly as well.
Supply Chain is about much more than just negotiating lower materials costs. A well constructed Procurement Strategy will raise the value of the Supply Chain to your company.
How do you manage your materials spend? Are you executing a Buying Strategy or are you just blindly placing purchase orders ?
When preparing for a negotiation, it is common to identify the issues to be negotiated, decide on negotiating tactics to use on your supplier, think through what your supplier may say and practice saying the words you’ll use during the negotiation.
Those are all necessary components of negotiation preparation.
But, they are not enough. To truly reach your potential in a negotiation you need to understand some key things about your supplier. This article will focus on three major things you need to know about your supplier before beginning a negotiation.
How do you get to know them? You can research your supplier and/or you could – get this – ask your supplier contact!
There is a great line in one of the Spider-man movies, “With great power comes great responsibility!”
Procurement organizations can have the power to spend and control as much as 75-80% of a company’s revenue. Now that is power! And with that power comes a huge responsibility.
Less enlightened organizations still think of Procurement as a back office function processing transactional purchase orders and standard contracts. But better informed and leading organizations see and recognize Procurement for its strategic value.
What actually is the power that is within Procurement’s mandate? And what responsibility does Procurement have commensurate with that power?
The company was new to the general merchandising business. As such the Category Managers were going wild with ideas on how to expand their product assortments and procuring new and interesting products to sell.
But unfortunately their zeal did not come with a thorough understanding of the Supply Chain implications of their decisions.
This all came to a head when they had placed orders for a large number of oversized items, including those giant stuffed teddy bears. You know the kind. The giant stuffed animals that are anywhere from 5 feet to 8 feet tall, like you find at Costco.
What followed was a disaster in terms of cost and customer satisfaction.
Regardless of what industry your company is in you are dependent on suppliers to operate your company. Thus it makes sense to have a Supplier Relationship Management program.
Suppliers provide components for products you manufacture and sell. Suppliers provide services for products or services you take to market. Suppliers move your goods from one point to another. And suppliers provide the goods, supplies, software and other items required by every function in your company to conduct day to day business.
Without suppliers no company could survive, let alone thrive.
Yet historically too many people have treated suppliers transactionally with no to little regard for fostering mutually beneficial relationships.
Going forward it will no longer be sufficient to just have passive supplier relationships. Companies must have a formal, strategic Supplier Relationship Management (SRM) program!
Previous CIO of General Motors (GM), Tony Scott, was once quoted saying,“GM is a highly collaborative organization; we rely on a whole tier of suppliers for everything that we do.” They rely on collaborative innovation.
Our organization’s products, customers, and profit, are ultimately a byproduct of the global supply chain networks that operate on a daily basis to add value through collaboration. The complexity of global supply chains – especially in organizations like GM, often the elephant in the room – require hands-on relationship management of suppliers to ensure that supplier collaboration will lead to added value, and innovation.
It’s nice to see that their previous Chief Information Officer had enough perspective to recognize their suppliers’ importance.
Suppliers are an intrinsic part of the Supply Chain. It does not matter what business you are in, what products you make, distribute and sell, or what part of the world you are in. And it doesn’t matter where in the Supply Chain you are. You can not accomplish anything without collaboration with your Suppliers.
Yet I have seen, like many of you, Suppliers treated in many different ways. No matter what the circumstances are poor treatment of Suppliers is never appropriate. Given that Customers fundamentally need their Suppliers to be successful why do people treat them badly? And how do we ensure there is a healthy and productive relationship between Suppliers and Customers?
Working together with your Suppliers is always a formula for success!