| In supply management you get value from your key | | | | from the supplier; and to start open book costing |
| suppliers by agreeing a purpose for your relationship | | | | and activity based costing so that the true cost of |
| with them and then translating this into objectives, | | | | providing the service could be identified and waste |
| targets, measures and specific actions that deliver | | | | eliminated). |
| that purpose. If you don't do this then their failure to | | | | Step 4: develop a strategy for achieving each |
| deliver real value either goes unnoticed (and so | | | | objective. In my example, one strategy was to |
| operational problems are never solved and there is no | | | | extend the range of services it offered my client and |
| innovation) or at best is informal and unstructured | | | | start a process of early supplier involvement in |
| and therefore never delivers. | | | | setting project briefs that they bid for. |
| To get this value you need a process and this article | | | | Step 5: decide how you will measure the progress of |
| explains the seven steps in such a process. | | | | these strategies. One measure my client and their |
| Step 1: agree a purpose for the relationship. A client | | | | supplier agreed was the percentage of the supplier's |
| of mine and one of their key engineering services | | | | range of services that my client used in a year. |
| suppliers agreed that the purpose of their working | | | | Another was the cost of bidding for new projects. |
| together should be to create a relationship that | | | | Step 6: set targets for the measures you have just |
| continues to deliver value to both sides. This makes it | | | | agreed. For the measures just described, the target |
| a mutual strategy and one that continues into the | | | | for the first measure was 60% of the supplier's |
| future. | | | | services used in the following year and for the |
| Step 2: write a mission statement based on the | | | | second measure that bid costs should be less than |
| purpose. The mission that then flowed from my | | | | 10% of the value of the contracts for which they |
| client's purpose with their supplier (abbreviated here | | | | bid. |
| for simplicity) was for each party to be first choice | | | | Step 7: develop improvement initiatives that will |
| for the other in commercial matters (for example the | | | | deliver the targets. Initiatives are delivered by |
| supplier bringing new ideas and innovation to the | | | | cross-functional teams from both sides assembled for |
| buyer first). | | | | that specific project and then disbanded when the |
| Step 3: set objectives based on achieving the mission. | | | | project is completed. The projects are the glue that |
| Three objectives were agreed that supported their | | | | holds the whole process together and are the means |
| mission (to identify gaps in the supplier's service | | | | of achieving value for both sides (because they are |
| offering that the buyer wasn't commissioning; to | | | | linked to the objectives, mission and purpose of the |
| reduce the cost for the supplier in bidding for work | | | | relationship). |