• No yelling fist pounding or trying to take an upper hand

Express yourself at the right time.

• No interrupting or yelling  

Listen to the other side

• Ask questions and draw them in.

Speak clearly and say what you mean.

• Do not hedge be direct commit to only what you can deliver.

Negotiation is communication!
 

Today’s supply management professional is faced with overseeing increasingly complex supplier relationships. A supply management organization may track such necessary tactical metrics as delivery and quality performance, and perhaps even supplier cost management. With increased workloads and time pressures, however, supply managers may not be routinely monitoring the key suppliers, even informally, with the same diligence at a strategic level: market position, business objectives, financial stability, new product/service innovation, and stability of their supply base. 

Supply management professionals with less than 10 years of experience have had very little exposure to managing the supply base in the face of economic downturns. During harsh economic times, suppliers may consolidate workloads and lay off key contacts, perhaps even closing an operation altogether that was serving the organization. In some extreme cases, the supplier relationship must be rebuilt from scratch with commitments reestablished. Does the new supplying organization know the buying organization’s needs? Will the supplier deliver? Most importantly, does the product or service need continue to factor into the supplier’s strategic objectives? 

In order to manage suppliers in the face of layoffs or closings, the emphasis clearly rests on upfront planning. By the time a supplier has made cuts that affect the business relationship, it is too late to respond effectively if no forward planning has been done. 

Establish a “What-If” Action Plan 

What will you do when you learn of significant changes within the supplier’s organization? The key is to establish scenarios ahead of time. The economic conditions that lead to layoffs may also be indicators of raw material shortages or price increases. Your action plan should include a “fast-response” checklist in the event of layoffs or plant closings: how the supplier will ensure continuity of supply, interim contact persons for key functional areas, etc. 

Know Your Supplier 

At first glance, this statement seems trite. Supply managers have daily working relationships with key suppliers; supply managers know their products or services and understand the supplier’s processes, systems, and methods to varying degrees. But does the supply manager know the supplier’s strategic objectives? What is the supplier’s position/ranking among competitors? How are business conditions for the supplier? Is the business diversified or tied closely to a single industry? Does the supply manager’s organization carry some leverage with this supplier? (That is, what are the chances that the buying organization will be left out in the cold if the supplier lays off key contacts or, worse yet, closes an operation and hands the account to relative unknowns?) 

It is essential that a supply management organization have access to the supplier’s chain of command, including sales/customer account colleagues and perhaps technical support personnel. The value of informal discussions and relationship building with the supplying organization cannot be overemphasized, especially during cycles of economic downturn. 

Schedule Informal Communications 

Much as supplier representatives keep “tickler” follow-up files on key customers, supply managers should schedule routine phone discussions with suppliers to follow up with needs and expectations and to give and receive feedback. Good business practice and decreasing budgets dictate that supply managers schedule supplier site visits sparingly and with specific focus on a project or commodity. However, any visit or call should include some general “wavelength” discussions: Is the supplier still aligned with the buying organization’s business objectives? Are key policy or structural changes in the works? 

It may be helpful to develop and maintain a template of questions (for phone conversations) and observations (for site visits) for each supplier that serve as indicators of the supplier’s stability and business direction. An example of a supplier contact log with a template for questions and observations appears in the box below. 

Document, Document, Document 

It’s time to face the facts: supply managers may tend toward complacency with long-term suppliers, especially those with which a solid business foundation has been enjoyed through the years. Just a few years ago, it was not uncommon for supply management professionals to deal with the same individual in the supplying organization for a period of years, perhaps decades. 

Over time, supply managers and suppliers alike may deviate from standard processes and procedures and evolve toward a common understanding of “real” needs and expectations that sometimes vary widely from the standard. There is clearly nothing wrong with this. The problem occurs, however, when these deviations are known to only a few players on both sides and never documented. For example, a buying organization’s equipment service contract with a repair and maintenance service supplier may include no response-time standard. However, over time an informal response standard of two hours may have evolved, to the benefit of the supply management organization. With a shift of supplier personnel and priorities, a new service person may now respond in four hours instead of two, according to industry norms. Thus, the lack of a formal standard in place may prove costly to the purchasing organization in terms of equipment downtime. As business conditions warrant change, supply managers must document the changes with even an informal “We agree that …” memo signed by both parties. 

If a supplier’s service levels start slipping, one’s corrective action process should communicate and manage the problem resolution at an appropriate level of response: 

• Meeting with the root cause identified and documenting supplier commitment to fix the problem by a specific date 

• Written warning/concerns expressed 

• Probation (e.g., the loss of 25 percent of the business to another qualified supplier) 

• In extreme cases, total re-sourcing 

Supply management professionals are accustomed to and proficient at managing change. This challenge now encompasses much more than the current supplier relationship. To the extent that supply managers monitor the supplier’s strategic direction, consider the risk of future downturns, and plan accordingly, a supply manager will mitigate the risk of negative consequences to his or her organization. The plans and observations that supply managers make now will pay huge dividends in the long run. 

Contributed by: 

Sherif Eskandar, Purchasing in the Middle East for Nestle