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.
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.
- 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.