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How important is effective supplier management to your business?
As the trend towards outsourcing continues to grow managers in many businesses have moved from managing staff to managing external suppliers.
What additional skills and knowledge do they need if the business is to derive the most value from the supplier relationship?
One of the biggest growth areas that we have seen in the last year is in working with managers whose role has changed from one of traditional line management to one where they have a responsibility for managing external supplier relationships. Whilst the leadership and management skills that they have developed are still very relevant the context is very different. For example:
- How do they "manage" a number of people from an external organisation to ensure that they deliver against an agreed service level agreement and a set of key performance indicators?
- What are the implications of managing a situation where your dependency on the supplier is at least equal to their dependency on you? This can be especially true where business critical services have been totally outsourced?
- What are the differences between changing the targets and performance standards for an external supplier compared to the same exercise for in house staff? The latter can be handled via the performance review process; the former may involve contractural change, with possible budget implications.
- What skills do your managers have in managing the supplier and the customer relationship? In outsource contracts the manager has the responsibility to deliver to the customer, be they internal or external via the effective management of the supplier.
- How do disputes get resolved without resorting to waiving the contract in the suppliers face and accusing them of breach of contract? Remember, particularly where the supplier is providing a critical service there is normally a lengthy contract and a high degree of dependency.
- How skilled are the managers at planning and managing supplier review meetings? Yes there are similarities with running staff meetings, but there are also fundamental differences.
- What levels of negotiation skills are required for contract negotiation and for the ongoing negotiation points that need to be resolved during the life of the contract?
- How is a manager able to maintain supplier performance during the exit stage of a contract?
- What is the value of developing a partner rather than a supplier relationship? What is involved? What is the pay off?
These are some of the many questions raised when managers move into supplier management roles. Of course, supplier selection and engagement usually involves procurement and supply side management specialists within the business. They are the experts in defining service level agreements and contract negotiation. However they are not functional specialists, so functional managers are often involved.
The key point is that it is usually the functional managers who have to manage the on going relationship.
For them, managing external supplier relationships, unlike the procurement professionals, is a new experience. More and more businesses have realised that in the move from staff to supplier management these managers require help, support and development.
What do the following organisations have in common?
- National Australia Bank
- HBOS
- Nestle
They are all large organisations. They all outsource a range of services from pensions and payroll, to IT services, to warehousing and distribution.
They are examples of companies that we have worked with in developing their managers who have responsibility for managing external and total outsource suppliers.
The nature of their businesses are, of course, different; as are the types of suppliers that they are managing, as are the specific challenges their managers face. Using our considerable experience in this area, we work with our clients in developing a custom designed programme that meet their business needs and the development needs of the individuals.
If you would like to find out more about our work in supplier management, or would like to see example programme materials you can;
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