Good Supplier Relationship Management is like a Good Risotto. Want the Recipe?
A few nights ago, my girlfriend and I had over guests for dinner.
I decided that I would serve a classic mushroom risotto and my girlfriend was going to bake her famous baguette. I had all the ingredients home necessary to make the risotto except for the Arborio rice itself.
Upon entering the grocery store I knew exactly what I needed, so I headed directly for the pasta and rice aisle. Walking up and down the aisle I determined there were several variations of Arborio rice in this particular store.
The packages bared different brands and markings. One type was ecological, one type was made of wheat, some were less expensive, and others had highly marked prices, but they were all, in essence, the same rice.
The wall of Arborio, glared at me angrily from the shelves above.
So, I grabbed one.
But, did I really pick the rice there and then, or was it the decisions I had already made, beforehand, about the dinner that manifested into a selection?
Prior to selecting this box of rice, I knew the parameters, in which, this particular box of rice would be expected to fulfill. It needed it to be white arborio rice, ecological and not the same brand we had the last time we made risotto (that brand didn’t turn out well).
Knowing these parameters, I was able to weed through the options before I quickly, assessed their attributes- in line with my pre-evaluated parameters, and made an informed selection.
I know what you may be thinking.
“Um, it’s just rice.”
With that I can totally agree, but the principle of this selection process is what truly matters. The rice’s choosing illustrates that there is no such thing as proper selection without prior evaluation of the end result’s needs and goals.
What does this have to do with Supplier Relationship Management?
Supplier selection, as a process, could be comparable to my selection of Arborio. To further that notion, Supplier selection is where the processes involved in Supplier Relationship Management truly begin.
Supplier Relationship Management is a systematic business operation utilized for creating supplier transparency, trust, compliance, governance, standards, and in the end- better supplier quality.
“Developing a robust, easy-to-deploy method of evaluating suppliers is a critical business competency” (instituteforsupplymanagement.org).
As previously stated, the end results of Supplier Relationship Management aren’t going to be satisfactory for your business without proper pre-evaluation and assessment of the potential supplier relationship.
Starts with standards
Building your businesses expectations, standards and parameters for the question, ‘what is a quality supplier to collaborate with?’, is typically a rather streamlined decision in today’s marketplace.
Your business’ Code of Conduct (CoC) is an excellent place to start. Codes of Conducts are rather common amongst large, corporate, organizations. These corporate structured forms for company-wide operations and values are the bases for all activity that happen internally within your business. (But you know that!)
Selected suppliers should conduct their business, while collaborating with your corporation, with an intention to uphold common values. This typically means ISO compliant suppliers, those which are able to display a sustainability report and financially stable suppliers.
The determining of paralleled values, along with determining the needs from the supplier collaboration, is the first half to properly pre-evaluating and assessing your suppliers.
Specificity comes second
Industry specificity plays a large role in the evaluation and assessment of suppliers during the supplier selection process.
A meat manufacturer wouldn’t use the same parameters for supplier evaluation and assessment as a steel manufacturer; the same way you wouldn’t use basmati rice for a risotto.
“Suppliers are critical in providing essential components and resources for finished goods in today’s globalized supply chain networks. The number of components comprising a finished product may be small or immense as in aircraft manufacturing and other complex hightech products” (Li 2015).
Some supplier selections demand a more intensive assessment process, considering the advanced nature of the products they’re producing.
For example, within the car industry, “[…] Product life cycle is very short, from 3 to 4 years, and new models must often be developed using completely renewed materials or new technologies” (Simic 2016)
Supplier selection in the car industry must, subsequently, be focused on innovation and the ability to produce product efficiently. Furthering the notion of industry specificity!
Creating quality, creates competition
A competitive supplier selection process is never a bad thing when it comes to the evaluation and assessment processes. Weeding out suppliers, forces potential suppliers to be at their best to entice selection and collaboration.
This kind of jockeying for position can put your business in the driver’s seat for supplier selection, by leveraging your supplier base to compete.
“By measuring supplier performance, an enterprise can set a threshold for its suppliers that can lead to higher-quality results. Companies can better plan new products and services based on a good understanding of its suppliers’ capabilities and performance levels. Understanding local suppliers can help determine if they are capable of reducing total costs enough to outperform offshore suppliers” (instituteforsupplymanagement.org).
Strong supplier assessment builds a strong standard for quality performance. In a way, this epitomizes the reasoning behind evaluation and assessment of your business’ supplier base before selection and collaboration.
There’s an app for that.
The current paper-trail mode-of-operation is becoming obsolete in our fast-paced digital world.
Sending back-and-forth of forms, assessment surveys and compliancy certifications through email, and the logging of results in spreadsheets, is less than inefficient. It’s archaic and insulting to today’s technologically advanced world.
Procurement, quality and category managers have trouble seeing the need for a 3rd party application or work tool for assessment sending, compilation and evaluation platform, but the reality is, the shift isn’t just coming, it’s already happening.
Just like a good risotto, the sole decision of the rice won’t decide the tastiness of the final product.
Assessment and Evaluation are crucial parts of the Supplier Selection process and build a basis for strong supplier relationship management, but don’t ignore external factors in the process.
Until next week.
This publication is brought to you by author Sam Jenks, but also on part by Kodiak Rating — A Supplier Relationship Management SaaS functioning out of Stockholm, Sweden. Kodiak Community intends to challenge traditional business practices with innovative thinking and creation.