Supplier Management | Mastering the Nonprofit Source-to-Pay Process - Part 6
Nonprofit professionals rely on suppliers regularly to achieve organizational goals and objectives. Building strong relationships with suppliers can support the nonprofit's organizational mission and improve the experience of its constituents and beneficiaries. To facilitate this, Supplier Management practices are employed, encompassing negotiations, policies, performance management, and communication.
Negotiations
As discussed in Part 2 of this series, it is crucial to understand your nonprofit's strategy and position before entering negotiations. Think about how you will manage the supplier during the relationship. How will the negotiated contract create value for your organization and its supply chain? Embedding your organization's goals and objectives into the negotiation and the contractual agreement will help you to better manage the relationship from the start.
Be sure to include performance criteria within the contract. This allows you to review the performance measure with your suppliers throughout the life of the relationship.
Policies:
Supplier Policies, or codes of conduct, define the standards you hold all suppliers to with which your organization does business. These policies might include labor or work standards, ethics, environmental, guiding principles, or other key aspects that are important to your company. Type “Supplier Code of Conduct” into Google to see various examples from companies of various sizes for examples.
Regardless of what is included for your organization, aspects of your organization's Supplier Policy should be closely monitored, and clear incentives for superior performance or penalties when suppliers do not meet the standard should be defined. Ensure that your organization's policies are called out within your contract and the positive or negative consequences that can result.
Performance Management:
Effective performance management is a critical aspect of Supplier Management. As mentioned earlier, incorporating performance criteria into your contracts enables objective management of supplier relationships. For example, if a supplier provides goods, you may set tolerance levels that each item must meet. For service suppliers, you might link performance criteria to the quality of their work or other key measures.
Remember, “What gets measured gets done.” Just because something is easy to measure doesn’t mean it is the right thing to measure. Based on the desired outcomes for your organization, determine what the right measures are that would not have negative or adverse secondary consequences.
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A final point about performance measures would be to meet with the supplier regularly to discuss progress toward the measures in the contract. Support your statements with data to back-up your position of their excellent, good, average, or poor performance to remove frustration about subjective opinions.
Communication:
Just like most things in life, communication is key. Communication with your suppliers is important to creating value in the supply chain so everyone is working toward the same goal. To illustrate this, consider the analogy of solving a large jigsaw puzzle. In “The Republic of Science,” Michael Polyani discusses that the most efficient way to solve a large jigsaw puzzle is not to have many people work separately on different pieces of the puzzle. Rather, it is by everyone working together in cooperation. Each time a piece of the puzzle is fitted in, others will immediately watch out for the next step that becomes possible as a result. In this system, each participant will act on their own initiative by responding to the latest achievements of the others, and the completion of their joint task will be greatly accelerated. In summary, not communicating key pieces of information doesn’t just impact those without that knowledge, but it could impact both parties toward achieving the goal efficiently and effectively.
But what is the right level of communication? Determining the appropriate level of communication depends on various factors, such as the contractual relationship, the type of goods or services being procured, confidentiality requirements, and more. It requires judgment to strike the right balance of communication and cooperation for each situation.
Bottom Line
By emphasizing effective Supplier Management practices in negotiations, policies, performance management, and communication, nonprofit organizations can foster strong relationships with suppliers, minimize risk, maximize return on investment, and contribute to the overall success of their missions.
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See an index of all the articles in this introductory series below.
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1 年What a great series! What else are you thinking about writing?