Recent reports indicate that the UK
housing sector suffered a loss of over £597 million* due to supplier
mismanagement or a lack of proactive management by housing organisations.
Organisations that fail to manage their suppliers risk declining service quality
and increased costs. Signing a supply contract or framework agreement is just
the beginning of a long-term partnership that could last many years.
Establishing a strong
organisation/supplier relationship based on a precise supply specification
outlined in the contract or framework agreement is essential. This supply
specification should define a supplier's product and service offering while
also setting the standards to which suppliers must adhere.
The Importance of Supply Specifications
The supply specification should include
clear commercial, legal, and quality management standards to ensure suppliers
meet an organisation's requirements. This will provide a basis for measuring
supplier performance and ensure they deliver the services according to the
agreed terms.
It is crucial to ensure that the supply
specification is not overly prescriptive to prevent its criteria from hindering
service growth as relationships between suppliers and organisations develop.
The supply specification should not limit the adoption of solutions to supply
issues, which could allow suppliers to avoid fulfilling their service
obligations.
The supply specification should be
flexible enough for suppliers to develop innovative solutions while meeting the
agreed service and supply standards. This will help to build stronger
partnerships between suppliers and organisations, leading to better service
quality and lower costs in the long run.
It is imperative that organisations
proactively manage suppliers to ensure that service standards are achieved and
even surpassed, whilst costs are minimised. Communication is critical to
achieving this and must be formalised so that an organisation and its supply
base can track and trace their progress towards maximum service at the least
cost.
Supplier Onboarding
The supplier onboarding process is a
crucial step in establishing a successful partnership. During this process,
both parties must take the time to understand each other's needs and
requirements. This understanding will enable both parties to work together to
optimise the service offered while minimising the costs and risks associated
with operating under a contract or framework agreement.
Each party must be clear about their
expectations and needs to achieve this. This includes understanding the scope
of work, the deliverables, and the timelines involved. It is also essential to
have a detailed understanding of each party's roles and responsibilities and
any performance metrics that will be used to measure success.
Establishing effective communication
channels and protocols during the supplier onboarding process is crucial. This
entails identifying primary contacts, scheduling regular meetings, and
implementing a reporting system to address issues or concerns.
Organisational Needs and Requirements
By taking the time to understand each
other's needs and requirements, establishing clear communication channels, and
defining roles and responsibilities, both parties can work together to
successfully onboard the supplier and establish a long-term, mutually
beneficial partnership.
Highlighting the critical success
factors is key between the parties in the initial stages of forming a mutually
profitable relationship. An initial meeting with the supplier should be held to
explore and ensure that the supplier fully understands the following:
- Expected trading volume.
- Order process that will be used.
- Operational processes and procedures to be used.
- How costs will be managed.
- Service quality and standards to be achieved.
- Delivery process and lead time.
Supplier Service Issues
To ensure that both parties can maximise
the value extracted from the contract or framework agreement, it is critical
for them to carefully review and eliminate any potential problems or
bottlenecks that may arise. They should adopt a proactive stance in identifying
and resolving any possible obstacles hindering their ability to fulfil their
mutual responsibilities.
National issues such as the inability to
recruit staff are fundamental to consider, as they can significantly impact an
organisation's and its suppliers' ability to deliver high-quality services. It
is, therefore, essential for both parties to carefully evaluate any such issues
and devise a plan for addressing them.
It is also essential to recognise that
national issues, such as labour shortages, are outside the control of any
individual organisation or supplier. Therefore, it would be unfair to blame
suppliers if they cannot fulfil their obligations due to such an issue.
Instead, both parties should work together to identify the problem's root cause
and devise a plan for addressing it.
Effective supplier management is
critical to identifying and overcoming issues beyond the direct control of an
organisation and its supply base. This means that both parties should work
together to develop a partnership approach to problem-solving, focusing on
identifying and addressing any issues that might prevent them from delivering
high-quality services.
If a supplier cannot employ staff due to
a national labour shortage, it is in both parties' best interests to
collaborate to resolve the issue. This might involve exploring alternative
recruitment strategies, working with local government to address the underlying
causes of the labour shortage, or even considering alternative service delivery
models that do not rely on traditional staffing arrangements.
Supplier Management Review
To succeed in supplier relationships, it
is essential to have a mindset of collaboration and be ready to tackle any
obstacles that prevent organisational/supplier relationships from developing to
their full potential. Through a proactive and cooperative problem-solving
strategy, both parties can guarantee the delivery of best-in-class services
that cater to their organisations' requirements.
Monthly supplier meetings should be
conducted for significant suppliers with an annual spend above £100k. Quarterly
meetings should be scheduled for intermediate suppliers with an annual spend
between £50k - £100k. Meetings should be held biannually or annually for
suppliers with a yearly spend below £50k but whose service is crucial for
organisations to function. The timing of meetings and respective spending
levels may vary between industry sectors.
A supplier must address urgent supply
issues as they occur. However, severe non-urgent supply issues should be
recorded between supplier meetings and used to form the agenda for the next
meeting. This ensures that all service issues are captured and dealt with. A
supplier can only improve its service offering if it knows where to improve to
meet an organisation's expectations.
Supply issues must be resolved to
benefit an organisation's internal and external stakeholders, including
customers and suppliers. Setting impossible targets for suppliers to achieve
will only increase costs or lower an organisation's service offering. Organisations
must be fair to suppliers but never let suppliers dictate the organisation's
relationship with their customers.
It is common for organisational contract
or framework agreement managers to avoid upsetting suppliers, but assertiveness
is essential when suppliers try to avoid their obligation to resolve poor
service levels. The contract or framework agreement manager must hold the
supplier accountable for their poor service, as failing supplier service
standards will inadvertently contribute to an organisation's failure to meet
its customers' requirements.
Using an independent third-party
mediator can help organisations overcome supply issues when the supplier is
uncooperative or unwilling to meet their supply obligations. A strong lead is
necessary to manage the problems in such cases.
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*CIPS - 2019
