Gavin started his career at Nestle before moving to Morgan Stanley where his roles included International Head of Procurement and Chief Operating Officer for the Global Sourcing Function.
After setting up niche consultancy Triangulus to specialise in the transformation of its clients’ supplier management capability, major projects have included establishing the global IT vendor management profession at BP amongst work for clients in the private and public sectors.
What are the biggest challenges facing supplier management?
Firstly there’s no consistent definition of it, where it starts and ends and who’s best placed to do it. Simple things are not being done and there is a skills capability gap between the supplier and its customer where the customer is unsure how to drive innovation and extra added value from the relationship.
Focusing on periodic supplier segmentation means disproportionate effort isn’t wasted on suppliers that don’t warrant it, and addressing the indifferent top level support, unclear roles and supplier management activities as well as competency and capability gaps will help a number of issues.
We’ll often see the customer and supplier having different drivers, the customer lacking negotiation skills in a post contract environment and little appreciation for the do’s and don’ts around the contract itself.
What skills and competencies are now most in demand?
These run through process, persuasion and commercial skills in the first instance.
It starts with putting appropriate governance in place between functions at all levels, determining where to concentrate efforts and who has to be involved in making supplier decisions, defining and agreeing measures both internally with the business and externally with suppliers.
Getting support and buy-in at all levels is crucial to how each person’s role collectively contributes to the overall management of the supplier. Anyone engaging with your top suppliers is doing supplier management anyway, and they have to be doing this very well.
Then it’s knowing what drives your supplier and the tactics they’ll use to achieve their goals: how far you can or should push them given you may be in a long term relationship; getting away from opportunistic tactical behaviour to genuine trust and openness so they’re incentivised to do it better, faster and cheaper and will bring new ideas to the table without fear of eroding their own margins; making a real difference versus simple paperwork exercises in areas such as sustainability.
What is key to getting the most from suppliers?
Clear specifications in the contract and clear expectations on both sides, fair treatment and mutual respect with agreed processes to manage and engage with suppliers at all levels and a universal compliance with that structure (so neither party bucks the process when it suits them, which may give rise to one party paying lip service to it).
‘SMART’ measures reflect the business drivers and where the relationship is in the contract lifecycle, and understanding what’s practical here makes sense for both you and your supplier – after all, you get the behaviour you measure for.
What does ‘value’ represent, moving forwards in 2011?
Given the trend towards more outsourcing to all areas of the globe, further supplier rationalisation and a move to outcome based contracts for key services, strategic suppliers should be able to suggest more innovative ways for its clients to run its business and meet its business objectives.
This doesn’t mean the supplier merely suggesting it takes on more work at the expense of another supplier. The suppliers and its client’s success should be aligned in some way.
What are your measures for success?
For my clients I like to see a robust governance structure and processes in place; a skilled and competent workforce operating and co-operating in a consistent manner with the commercial benefits established pre-contract being delivered and not leaking away. Suppliers need to behave appropriately and reflect the client’s business drivers, provide improvements in behaviour and ways to measure tangible incremental value (ie innovation) over and above the contract specification.
Keeping it simple and practical – people in the business may do it as part of their jobs so a clunky tool-biased solution won’t necessarily deliver better performance – skilled people are the key.
What might you ask a fellow Supply Chain professional here?
What good supplier management looks like, what benefits it would bring you, how you’d measure it and how you’d get there. And what quartile would you say you are in?
This piece was originally featured in our newsletter, The Right Fit (February 2011 edition)