Vendors are Machines. Suppliers are People.

We all rely on suppliers. It doesn’t matter whether they are providing you your personal ‘big screen TV’ or providing you ‘materials & supplies’ that help your organization supply others. Suppliers are extremely important.

I once heard a person refer to a supplier as a vendor. It was an innocent, positive comment that reinforced how vendors were “part of the team”. The supplier responded with, “I thought your team was composed of people, not people and machines”!

With globalization, and continued growth in various trade agreements, the flow of products and services (sometimes 50% of the total cost of the product) do not often recognize country borders. Finding the best suppliers, the best deals, is a never-ending effort. Also, monitoring the performance of suppliers becomes more important, both for your organization and for the supplier. Alignment with supplier’s goals and objectives will bring you the best results….

Suppliers want:

• Prices for their products and services (P/S) that return a good profit
• Drawings/prints that support the ability to make 100% quality P/S
• Lead times that allow adequate time for reorder and production
• Improvements that will benefit the customer and themselves
• Enough profit to be able to invest in innovations and new technology
• Long term relationships based on trust and honesty

Customers want:

• Lower costs with best competitive pricing
• 100% quality on all P/S
• Delivery that is always on time, with shorter and shorter lead times
• Improvements that enhance the P/S and stay ahead of the competition
• New technologies, ideas, and breakthroughs
• Relationships that are based on mutual, trust, respect, and honesty

The above is not an all-inclusive list of wants. However, there is substantial overlap in wants that reflects the importance of developing close supplier relationships. Some call these ‘partnership style relationships’.

Partnership Style Relationships

It doesn’t matter whether you are a large corporation, a government operation, a small business, or another type of entity, working very closely with your suppliers will deliver better, consistent, long term performance. Some of the best practices that have shown continued excellent results are what I call my “Top 10”.

1. Listen to your suppliers. Create forums for suppliers to bring forward their ideas, concerns, and issues. Supplier Councils with clearly defined charters are excellent opportunities for both the customer, and the supplier.
2. Set targets and goals. Whether targets are for cost, quality…or improvements, setting agreed to improvement targets provide alignment and focus.
3. Form Partnership Style Agreements. Contracts are contracts. Developing a ‘how we will work together’ agreement, will pull both parties closer together by establishing defined initiatives and activities.
4. Hold Senior Management Reviews. Once a year bring both parties senior management together to review performance and set common objectives.
5. Provide Performance Evaluation. Suppler evaluations (report cards) that reflect true performance is well received and provides a base line for improvement. Customer evaluations also reinforce the relationship
6. Hold Regular Supplier Training and Education Sessions. The regular interface of personnel from both customers and suppliers provides better alignment and understanding of opportunities to improve performance.
7. Regularly Visit Key Suppliers By visiting suppliers you not only will see the production of your P/S, but you will ‘see and hear’ directly from operators who are working for you. Often you will hear the good and bad. That is good!
8. Share Best Practices. Some best practices come from customers. Some best practices come from customers. All benefit from this exposure, and maybe adaptation.
9. Work Together on Focused Cost Reduction. By setting cost reduction targets and working together to identify opportunities both the supplier and the customer benefit. Some reductions are resident at the supplier, some at the customer, and others in the way the customers and supplier work together. By sharing cost reduction savings both the customer and the supplier benefit from the work effort.
10. Recognize Supplier Excellence. There is no better way to motivate a good supplier than to visit them, and thank the workers who are providing the excellent P/S. Some organizations deliver “Supplier Performance Awards” that recognize excellence in Cost, Quality, Delivery, Administration, Attitude, or Continuous Improvement.

Treating suppliers as partners, partners with ‘aligned goals and objectives’, is an evolutionary process. It is a process that requires effort and work from both parties. I have never met a supplier who didn’t want to be successful, and have the customer be successful. By using partnership style relationships you will find that quality relationships deliver quality performance! People to people!

Russell J. Bunio

8.24.2016