2005 Articles

How third parties can aid in organization, processes and metrics.

Supplier management services are often a fast, cost-effective way for collecting critical information about your suppliers. These organizations specialize in supplier discovery, financial profiles, reference checks, e-readiness evaluations, and data security and IP protection measures.

SMS firms can also handle the process and technical side: facility reviews, technical capability, environmental assessments, product inspection and testing, and product quality and reliability.

SMS offer a way to transform procurement/purchasing activity into a strategic business function. SMS services align the procurement/purchasing organization’s initiatives with a company’s key business and strategic initiatives; select and assess people who possess the vital capabilities to achieve success; and develop procurement/purchasing organization metrics and quantitative supplier management scorecard and feedback processes.

Here are some of the management tools an SMS provides:

• Develop written comprehensive commodity strategies to document the logic of supplier selection, measure performance to goals and achieve organizational consensus.
• Develop a robust contracting process to accurately document what was negotiated at the table.
• Identify capable suppliers of new product designs.
• Use a global data warehouse for procurement/purchasing to extract data elements for effective supplier management.
• Use collaborative Web-based tools in a geographically distributed procurement/purchasing organization to share files, extract data and enhance communications.
• Develop a problem escalation process from site to global functions to resolve material/component shortages and disposition excess and obsolete material.
• Use supplier surveys and supplier’s councils for feedback on procurement practices, and as a sounding board for new procurement initiatives.
• Develop and use performance management drivers.
• Set clear and quantifiable goals and objectives, ensuring performance standards are understood by employees.
• Establish goals and objectives with clear links to your corporate strategy, thus driving employee accountability for the “things that matter.”
• Recruit a highly effective staff, one that knows the tradeoffs between traits and knowledge.

Execution comes down to three core processes:

• People: making the link with strategy and operations.
• Strategy: making the link with people and operations.
• Operations: making the link with strategy and people.

These are just a few of many issues an SMS company addresses.

SMS firms can also provide global sourcing, which means taking advantage of regional differences in prices, possibly improving time to market, gaining access to local markets – and in some cases access to scarce resources – and developing a world-class supply base.

Finally, in building credible metrics, SMS firms use benchmarks based on similar company experiences to accurately gauge supplier performance and the health of supplier relationships. And they can conduct analyses of cost by region and cost of quality.

Don Payne is a Six Sigma Black Belt and a former member of Cisco’s procurement group; paynedr@bellsouth.net.