| Managing suppliers effectively is a key part of the | | | | chosen them for some strategic benefit and the |
| job of a Procurement professional. Different | | | | implication is that there are not many suppliers who |
| categories of supplier require different approaches | | | | can do this. The switching costs to other suppliers |
| and intensity of effort with critical and strategic | | | | can be enormous. Test the type of relationship your |
| suppliers warranting the most attention from you. | | | | organisation has with this supplier by looking at the |
| The first step in applying the right approach is to be | | | | frequency and type of involvement from other |
| able to recognise a critical or strategic supplier when | | | | functions in working with them. If the frequency is |
| you see one. Here are six things to look out for. | | | | often and both senior and operational management |
| 1. Selection criteria. If these have been structured so | | | | are involved then you have probably got a strategic |
| that the supplier chosen delivers a strategic benefit | | | | supplier. |
| for your organisation then they will be either critical | | | | 4. Cost requirements. You tend not to ask critical and |
| or strategic for you. Look at the products or service | | | | strategic suppliers for price reductions. Instead, you |
| they supply and trace them back to the key | | | | work with them on activities such as target costing |
| objectives of your organisation. A service that | | | | to identify what the transfer price between you |
| interacts directly with your customers (such as a call | | | | needs to be to compete successfully in the end |
| centre) and so is a factor in your customer service | | | | market and then find ways of delivering to that price. |
| objectives is, in all probability, strategic as would one | | | | It often needs transparency of costs across the |
| that helps to research and develop new products | | | | total supply chain |
| with you. | | | | 5. Information exchange. Critical and strategic |
| 2. Role of supplier. The role of a critical or strategic | | | | suppliers tend to work closely with you, particularly |
| supplier is to help provide mutual competitive benefit | | | | on joint events such as product development and bid |
| for both parties. Ask your marketing colleagues how | | | | management. You may even find that your supplier |
| your organisation competes in the market place and | | | | has an implant operation in yours to make working |
| what this supplier does to support this. For example, | | | | together easier. In this case, information exchange is |
| it might be that you have to bid jointly for new | | | | detailed and frequent at both operational and |
| contracts with your customers. If they can give you | | | | strategic levels. |
| a definite answer to this question then the supplier is | | | | 6. Number of suppliers. As critical and strategic |
| critical or strategic. | | | | supplier relationships are relatively uncommon in any |
| 3. Type of relationship. You will tend to have a long | | | | organisation the number of these suppliers is usually |
| term and possibly lifetime relationship with your critical | | | | very low and very stable. |
| and strategic suppliers. This is because you have | | | | |