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Creating and Maintaining Successful Supplier Relationships: Part 3

August 23 2011  |   leardonsolutions  |  All Posts, Supplier Management  |  2 Comments

In the last article on supplier management entitled Creating and Maintaining Successful Supplier Relationships: Part 2, it was shown that each of the Five Vital Characteristics of a Successful Supplier Relationship has a direct impact on the supplier commitment and capability. This article also described how the supplier manager should focus her efforts on implementing the improvement techniques for each characteristic, hence improving the commitment and capability of the supplier. In the end, this leads to an improved relationship.

The table below reiterates the Five Vital Characteristics of a Successful Supplier Relationship and the impact they have on commitment and capability. These characteristics were identified by the Leardon Solutions program managers after studying dozens of supplier relationships, both good and bad.

Leardon Solutions Five Vital Characteristics of a Suppiler Relationship

Five Vital Characteristics of a Committed and Capable Supplier Relationship

This concept of supplier relationship improvement can be communicated using a matrix of capability and commitment. The matrix graphic below shows the simple connection between commitment, capability, and supplier relationship success. There are four quadrants of the matrix and three states of the supplier relationship: Poor, Fair, and Good.

Leardon Solutions Supplier Relationship Management Model

  • POOR RELATIONSHIP: A Poor Relationship exists when the supplier does not commit to the relationship and is not a capable of performing the job at hand. In this case, the supplier must demonstrate some desire to increase their capabilities or their commitment, otherwise another supplier should be chosen. If the desire exists, the supplier manager should focus on using the improvement techniques for the vital characteristics.
  • FAIR RELATIONSHIP: A Fair Relationship exists when the supplier is either fully committed to the relationship or demonstrates good capabilities, but not both. It is possible for this type of relationship to be successful in the short term but typically the relationship will fall apart unless improvement is made. Again, this improvement will come through utilizing the improvement techniques for the vital characteristics.
  • GOOD RELATIONSHIP: A Good Relationship exists when the supplier exhibits full commitment to the relationship as well as demonstrates excellent capabilities. This is the pinnacle of supplier management and relationships in this quadrant are typically prepared for long-term success.

In the end, the objective is to improve the supplier capability and commitment by striving for improvement of the Five Vital Characteristics of a Successful Supplier Relationship: respect for individuals, partnership, growth and development, properly managed risk, and complementary capabilities. Implementation of these characteristics into the relationship by using the management improvement techniques will ensure an extremely productive relationship which will result in successful programs and projects.

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Creating and Maintaining Successful Supplier Relationships: Part 2

August 19 2011  |   leardonsolutions  |  All Posts, Supplier Management  |  4 Comments

The first posting on the topic of successful supplier management entitled Creating and Maintaining Successful Supplier Relationships: Part 1 pointed out that a successful supplier relationship consists of five vital characteristics which result from a relationship that encourages commitment and capability. These five characteristics are shown in the table below.

Leardon Solutions Successful Supplier Management Characteristics

These Five Vital Characteristics of a Successful Supplier Relationship were identified by the Leardon Solutions program managers after studying dozens of supplier relationships, both good and bad. To reiterate, the premise for these vital characteristics is that the supplier manager must influence the supplier to believe that the relationship is worth the time and that their team can do what the manager requires.[1] In other words, the supplier must be committed and capable and if a supplier manager can improve the commitment and capability of the supplier, the relationship will improve.

Each of these vital characteristics impacts the supplier commitment, capability, or both. In order to improve the supplier commitment, the supplier manager should work on improving the Respect for Individuals and the Partnership. If the supplier manager focuses on creating a relationship that has Properly Managed Risk and Complementary Capabilities, then the supplier capability will increase. Finally, improvement of the characteristic of Growth and Development will improve both the supplier commitment and capability. This is better described in the simple table below.

Leardon Solutions Capable and Committed Supplier Characteristics

Five Vital Characteristics of a Committed and Capable Supplier

So how does a supplier manager influence these five vital characteristics for improvement of supplier commitment and capability? Below is a list of the improvement techniques for each characteristic that, when implemented in the day-to-day supplier management, have been shown to establish a good supplier relationship.

Respect for Individuals

  1. Create an environment where everybody has the upmost respect for people and their opinions.
  2. Provide open and honest communications regarding performance of individuals (both good and bad).
  3. Create an environment where team members have genuine trust in each other.[2]

Partnership

  1. Allow an environment of open and honest communications about the state of the business relationship.
  2. Provide consistent, stable work that enables the supplier to invest and grow.
  3. Provide an environment where the teams engage in respectful debates about critical issues.[2]

Growth and Development

  1. Provide continual development of the supplier through an active development plan.
  2. Minimize the employee attrition rate by showing commitment to supplier’s growth and development.
  3. Develop a capable resource pool at the supplier through training.

Properly Managed Risk

  1. Both the supplier and supplier manager decide what risks to take and the implications of such risks.[2]
  2. Provide a team member training program to minimize mistakes and eliminate repeat mistakes.
  3. Provide a rewards and recognitions program that motivates innovation.

Complementary Capabilities

  1. Understand supplier employee capabilities and balance capabilities of integrated teams.
  2. Continually evaluate supplier employees and ask the supplier to improve underperforming employees.
  3. Focus the team individuals on using their capabilities to achieve team results.[2]

Influencing these five vital characteristics using the recommended management improvement techniques above improves the supplier commitment and capability which results in an improvement of the overall relationship. Remember that if the supplier thinks the relationship is valuable, they will remain committed. And if the supplier thinks they can do what is required, then they have the capability to excel and improve.

[1] Influencer: The Power to Change Anything, page 132, Kerry Patterson, David Maxfield, Joseph Grenny, Al Switzler, and Ron McMillan, October 2007.

[2] The Five Dysfunctions of a Team, A Leadership Fable, Patrick Lencioni, Wiley, 2002.

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Creating and Maintaining Successful Supplier Relationships: Part 1

August 17 2011  |   leardonsolutions  |  All Posts, Supplier Management  |  4 Comments

External suppliers are critical to business success since companies focus their efforts on their core capabilities while outsourcing the non-core efforts. While suppliers and vendors exist to provide an assortment of different objects and items, the focus of this discussion is on suppliers of raw materials, parts, and products in a manufacturing supply chain.

If you have worked in the field of product development and manufacturing, you have probably worked with suppliers that you considered “good” and some that were considered “bad.” You have probably also heard the typical story about an inventor or entrepreneur who was successful selling product from an overseas supplier until one day the relationship soured and the individual’s company collapsed. Why are some supplier relationships considered successful and others considered failures? Why do perfectly good supplier relationships go bad? In order to answer these questions, we must first understand the vital characteristics of a successful supplier relationship.

The premise for creating and maintaining a successful supplier relationship is to understand how to get the necessary behaviors from the supplier.  The book Influencer: The Power to Change Anything[1] states that research has proven “People won’t attempt a behavior unless: (1) they think it’s worth it, and (2) they think they can do what’s required.  If not, why try?”  In other words, the relationship between the two parties must motivate the supplier to (1) show commitment and (2) display capability in order for the relationship to be successful.  Therefore, the efforts to develop and improve a relationship with a supplier should start with increasing their commitment and capability.

Engineers and program managers at Leardon Solutions have decades of experience working with world-class material, part, and product suppliers in long-term, mutually beneficial relationships.  Through these years, we have found that a successful supplier relationship consists five vital characteristics.

Leardon Solutions Successful Supplier Management Characteristics

These are vital characteristics that should be included in the supplier management philosophy.  By creating influence on each of these five vital characteristics, a supplier manager can increase the commitment and capability of the supplier, thereby creating and maintaining a successful supplier relationship.  In the next blog posting, Creating and Maintaining a Successful Supplier Relationship: Part 2, we will cover each of the Vital Characteristics in detail and describe the key aspects for achieving each characteristic.

[1]Influencer: The Power to Change Anything, page 132, Kerry Patterson, David Maxfield, Joseph Grenny, Al Switzler, and Ron McMillan, October 2007.

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