Managing Suppliers

How to conduct supplier reviews

1.    Aim for Senior management buy in and speak to budget holders about which suppliers to address a total of  spend, and give an indication about whether if this savings driven, value add or both;

2.    Build  supplier profiles to summarises overall and departmental spend, contractual details and supplier profiles in order to undertake a well informed engagement programme;

3.    Agree that the first phase will concentrate on either top 20 suppliers or start by tackling the long tail and reverse the order with whom we will undertake commercial negotiations in order to achieve in-year and annualised savings;

4.    Highlight all opportunities for the optimisation of existing contracts and supplier relationships, e.g. rates, specification, alternative methods of delivery / products, improved service delivery and rationalisation of processes etc.;

5.    Review supplier performance against original contract outcomes;

6.    Build market and supplier knowledge, read white papers, tap into knowledge hubs to ensure a full understanding of future sourcing / category opportunities.

7.    Implement and embed formal contract management methodology in order to undertake exercises in subsequent years.

Draw up a negotiation strategy to be used as the background approach for the first and second meetings.  This is likely to be based on key issues such as:

•         Contract overspends

•         Disaggregated spend across the organisation

•         Rolling contracts (i.e. no time-limited written contract)

•         Lack of contract coverage

•         Over-specification and alternative products / services

•         Supply restructuring

•         Risk mitigation

•         Performance

•         Process inefficiencies

•         Price benchmarking

•         Non-cost efficiencies

•         Payment terms and other P2P processes

First meeting with the supplier – This is an introductory “get to know you” session with an emphasis on information and market intelligence gathering; The Supplier should be warmed up to generating a value proposal based on savings, efficiencies, specification, service levels, to carry out in- contract improvements.

Second meeting-“Meat on the table” This meeting is to discuss the value generation report or suggestions that the supplier has identified fo in contract improvements, which should contain one or more options to achieve win win scenarios and savings both cashable and non cashable.

Third meeting- Negotiation: Once the proposal has been discussed, push for even better value, discuss ideas with the supplier including gain share options.

Fourth Meeting  Review implementation of Value Add: This is a session to review the proposed plans and the success of the joint venture

Managing Suppliers require some form incentivisation and recognition, this can be added to the routine contract management as an addition to the supplier scorecard with a special award for the winning supplier with the best result i.e. Afternoon tea networking meeting with the CEO or Executive member for recognition of in contract improvement and value add.