Getting closer to your suppliers – the lessons learned from lockdown
By Spencer Hill, Director at MCP2 Limited
When the first Public Policy Note on the Covid-19 outbreak was released in March many organisations including HAs were suddenly reminded of the importance of their supply chain. Cue the frantic piano music from the early 20th Century silent films as everybody starts running around asking lots of questions whilst the despairing supplier sinks to their knees and wails amidst the melee. But it does not have to be this way, and rather than focus on the Covid-19 cloud we have heard enough about let’s focus on that silver lining: Supplier Relationship Management.
Supplier Relationship Management (SRM) is not new, and every HA is practicing it to some degree. But to understand and maintain a supply chain healthy enough to withstand the commercial aftermath caused by a pandemic requires a coordinated and sustained effort across all levels of an organisation.
Begin by knowing who your suppliers are and what they supply to you
You can interrogate your accounts or your Contracts Register or perhaps conduct a spend analysis to get your answers. The latter is a good starting point and the results can be used for many aspects of Commercial Improvement Programmes. However you do it, at any point in time you should know how many suppliers you have, what you buy from them, how much you have spent and the status and details of any formal agreement or contract between you. This is the minimum and this needs to be maintained if SRM is going to work. Without this you are sailing choppy waters on a rocky coast without a lighthouse.
Next you need to determine what these suppliers mean to you, your objectives and crucially, what would happen if they stopped supplying you. Understand not only what the impact of failure to supply would have on your organisation, but the state of the market this supplier operates in too. Clearly the stationery supplier failing is not the same as your lift maintenance provider going out of business, and both exist in very different markets.
This piece of work should not be underestimated. It will require a multidisciplinary team to deliver as you combine knowledge on markets, existing relationships, and supply chain best practice to truly understand your suppliers. Kraljic’s model (left) is a familiar approach and will be the first tool a supply chain expert will pull out of their bag as it enables you to take a snapshot and segment it. You are a step closer to understanding which suppliers to hug first.
Understand what you mean to your suppliers
So now you know who your suppliers are and what they mean to you, you also need to understand what you mean to them. This is a two way process after all, and it is no surprise that your suppliers are also investing in SRM just as you are. This diagram saves a thousand words. If you have classified a supplier as strategic but they consider you as a nuisance or exploitable then you have work to do.
Right now suppliers may have to treat all of their clients as core to get them through the crisis, but how will this change when the world gets back to normal? How did the way you treated them mid-crisis change your relationship?
For those suppliers keeping your organisation running you need to be actively working to ensure they see you as an attractive account. If they don’t and you can’t change their minds then you should be back out there looking for someone else.
Now the benefits of the hard work begin to materialise
You should now be able to confidently list the ten suppliers who mean the most to you. It may sound far-fetched but every Chief Executive should be able to list their most important suppliers and know the status of each relationship. These companies are critical to the success of your organisation, so they need to be kept close not only so they continue to treat you as a preferred customer, but also so you know moments after they do if something is going awry. If one of your top ten suppliers is in trouble then you might want to consider helping them out of it, and if you can’t then you need to be activating that contingency plan you wrote at the first sign of potential supply chain failure.
But SRM is not just for times of crisis, and it is also not just for those moments when a supplier is in contract with you and the relationship is mature. SRM covers the entire commercial lifecycle from the moment you (or a supplier) identifies a requirement right through to beyond the delivery and perhaps disposal of the final hour of service or last widget. At one end suppliers become research companions or even partners in a joint venture whilst at the other they are providing references or perhaps gearing up to rejoin you in your supply chain if you treated them right the last time.
Strategic Relationship Management is a lifeline in times of crisis for both parties, but it also ensures your staff and residents of good service, brings you value for your money and crucially assures compliance through effective supplier relationships.