Choosing a supply chain partner

Collaboration is key in critical outsourcing relationships

In the early part of my supply chain career, I spent several years managing key accounts on behalf of a third-party logistics and supply chain service provider.  Working with large multinational clients, we had an opportunity to learn and observe different supplier management styles.    

From the demanding to the passive, to the metrics obsessed, to the highly prescriptive, and to the collaborative, each brought their own way of managing a key relationship that was responsible for ensuring the delivery of their products to their customers. It is not easy to manage in an environment where you do not directly control the resources and execution of the processes, so I continue to have a lot of respect for those managing the relationship from both the customer and the supplier companies.

For the past 9 years in PerformanSC, we have supported clients in establishing and managing outsourcing relationships. We always place a high value on the cultural fit between parties in the selection process, and we are frequently asked to support and train teams on improving the governance of the relationships.

Some thoughts that may help in guiding those that are responsible for managing these supplier relationships.

1. Put the effort in upfront in picking a partner that has the operational capabilities to meet your supply chain needs. It is also important that they have a team with whom you believe you can do business.  The people side of the equation should not be underestimated because when your needs change, or operational issues arise – and both will happen – it is this relationship that will determine the level of success of the relationship.
2. When you make your decision on a partner, commit to the relationship and do what you can to make them and the relationship successful.  It is true that you can do your job by holding them accountable for their failings, but the truly successful supplier managers work to see what needs to change on both sides of the relationship to make it a success.
3. Put a governance process in place to create a framework for the day-to-day discussions and management of the account.  Know what reports and KPIs are needed and create a repeatable process on a daily, weekly, and monthly basis to deal with everyday issues.  The data provides visibility on performance and the structure allows you and the partner the time and scope to deal with changes to requirements, planning for holidays or launches or dealing with process improvements.
4. Accept that issues will occur and create an environment where the supplier can alert you early to issues without fear of reprimand.  The one thing worse than bad news is no news when there are genuine issues.  Approach issues with a view of how they can be resolved in a constructive manner, but make sure to follow up with the root cause and corrective actions. It is in the most difficult times of a relationship, that you realise the value of strong partners.
5. Set objectives for the service and be clear about how success will be measured and managed.   Recognise that to meet these objectives, frequent change is required not only by the supplier but also by the outsourcer.  Hold each other accountable for your respective actions to deliver on these changes.
6. Encourage a broader understanding of each other’s processes – including by sales, customer service and support teams.  This helps manage expectations and inform communication to customers about what is possible.
7. Over-communicate on large projects, holiday season requirements and changes in scope.  Set guidance on what needs to be achieved and collaborate on how best to achieve this.  Allow the provider to bring their expertise to the table on how they can best support based on their process and capabilities.
8. Celebrate success and create an environment and momentum to drive more success.  Recognise those at all levels of the organisation that have gone the extra mile to make things happen.  It is important to bring the team with you on the improvement journey and recognition – whether an email, a call out on a slide or a small token – helps the team feel part of the organisation and part of that success.
9. For suppliers – empower your account management team to be the voice for your customers within your operations, to promote change and be flexible to meet the end customer business requirements

In today’s supply chains, partners are an essential success factor in delivering excellent performance.  The critical link to this success is the relationship between the supplier manager and their counterpart on the supplier’s account management team.  Contact us if you would like to discuss approaches to building more effective outsourcing relationships.