Procurement & Supplier Development

Procurement life doesn't end with a contract?being signed. I covered different areas earlier of what we should think about (for example,?Procurement & transaction management). Supplier development is a critical activity. It goes beyond supplier management (which solely focuses on ensuring suppliers deliver on what has been agreed).

What is supplier development?

To keep it simple, supplier development is the process of working with suppliers one-on-one to enhance their performance. It's not only a procurement activity but needs to be coordinated. So, all relevant stakeholders are working with the?supplier?to build a more fruitful?relationship.

?Why is it important?

The competitive challenges in the market today are one of the driving factors behind supplier development. Changing suppliers is risky because it includes expenses, time, and resources. Taking an existing supplier and assisting them in improving their performance will provide more value to your organization.

Multiple gains are expected from a good supplier development program:

• Earn a competitive advantage, lower costs, and help suppliers to maintain their margin
• Encourage collaboration between suppliers
• Drive innovation
• Create stronger long-term supplier relationships, increase their responsiveness, and?help to mitigate risk within the supply chain
• Resolve/enhance performance and quality issues
• Enhance customer satisfaction, and better quality both of existing and new products or services
• Improve environmental performance and sustainability within the supply chain

The approach to having a structured program is important as you cannot have a unique way for all suppliers

How do you develop the right supplier development framework?

Developing a supplier development framework involves a systematic and comprehensive approach to identifying and assessing the needs and capabilities of suppliers your company needs. Here are some steps to develop the right supplier development framework:

1. Prioritize suppliers based on their strategic importance, risk level, and potential for improvement.
2. Identify your goals for each supplier, and define what you want to achieve through supplier development: Reducing costs, improving quality, increasing capacity, or enhancing sustainability, innovation...
3. Evaluate the performance of your suppliers to identify focus areas. It should?include at minimum conducting site visits, reviewing performance metrics, and gathering stakeholders' feedback.
4. Define supplier development strategies focussing on key areas of opportunity.
5. Create a jointly?owned and agreed action plan with specific goals, timelines, and metrics for each supplier.?
6. Implement and monitor progress to ensure that both your company and your suppliers are progressing towards the goals set.
7. Continuously review and improve your supplier development framework to ensure that it is effective and meets your goals.

Overall, developing a successful supplier development framework requires a deep understanding of your organization's needs, the capabilities of your suppliers, and a commitment to continuous improvement. It cannot be done in isolation and needs stakeholders' engagement too.

Given the level of resources needed to do this properly, you want to ensure that you define a good supplier tiering model and associate it with a manageable development model. Less is better than spreading your resources too thin!