--- To enhance the value and performance of procurement and SCM practitioners and their organizations worldwide ---



Relationship Alignment Programs...

Author(s):

Norman K. Owen, C.P.M.
Norman K. Owen, C.P.M., Senior Director - Strategic Procurement BellSouth, Atlanta, GA 30375,(404) 420-6074
W. J. Jack Wagner, C.P.M.
W. J. Jack Wagner, C.P.M., Manager - Procurement, Strategic Research & Analysis, BellSouth, Atlanta, GA 30375, (404) 420-6088

81st Annual International Conference Proceedings - 1996 - Chicago, IL

Relationship Alignment Programs, Taking A Journey With Key Suppliers, Creating Strategic Value Along The Way

Abstract. For years and years doing business in the conventional arms length way by bidding, quoting, requiring multiple sources for similar products, has produced significant tactical benefits to most businesses and governments. Aligning existing relationships, becoming world class customers partnering with world class suppliers, may generate far more strategic value for those facing radical changes in their industries.

Much focus and attention has been given to changing the supplier's processes, and their mindsets. Less attention has been paid to the concurrent processes of internal behavior as a customer and the behavior shifts required up,down, and across the enterprise.

The customer's buying power and the supplier's sales volume make their incentive for change within the supplier's enterprise fairly straightforward. The incentives to change within the buying enterprise is far less clear. This is particularly true when profits are high, and market share is optimal. Yet, to maintain the benefits from a world class supplier over the long term the buying enterprise needs to behave as a world class customer.

Opportunity. Relationship Alignment is a process with tools developed to facilitate successful supplier relationships (business alliances, or other supplier initiatives). The goal is to develop Relationship Alignment as a competitive advantage by dealing with suppliers from two perspectives:

  1. strategically, by leveraging supplier relationships to address capability needs in support of the corporation's business strategies, and
  2. operationally, by focusing not just on first costs but on total costs, quality, speed, and flexibility.

The Relationship Alignment process and tools can be used to make improvements with suppliers at any point on the business relationship continuum. For instance the primary focus can be on making operational improvements or on identifying joint development or joint marketing opportunities. The Relationship Alignment Process provides the steps necessary to conduct relationship alignment programs or supplier initiatives. You are not required to start at the beginning in order to leverage the benefits of the alignment process and tools. You may enter the process at any point. For example, an incumbent supplier may be the prime candidate for an alignment program, or the opportunity areas may be well defined. In these situations the appropriate steps could be eliminated.

The following is a list of each high level step in the alignment process. Select the Supplier(s) who will participate in an alignment program

  • Establish management commitment from both companies
  • Kick off alignment program and establish mutually agreed-on objectives and milestones to focus the joint team
  • Analyze opportunity areas and develop recommendations
  • Jointly assess the value that both companies are gaining from the relationship and initiate continuous improvement.

These five steps would be the assignment of a multi- functional team formed to develop the alignment with representatives from the supplier's and the customer's organization. The customer's procurement function typically would share the leadership of this alignment program with the supplier's sales and manufacturing organizations.

World Class Customer. In today's environment large corporations have many points of contact with a supplier. These points of conmtact are typically either functionally, geographically or through multi-functional teams. To determine the behavior expected of a world class customer and to communicate it throughout the customer's organization can significantly improve the results of relationship. A structured program is needed to identify the changes needed and get the message throughout the organization. There are three focus areas of an behavior assessment program.

  1. Supplier perception of the buyer as a customer (External)
    • top 20 suppliers surveyed through personal and phone interviews
    • Multi-functional assessment from supplier
  2. Self assessment as a customer (Internal)
    • Interviews with decision makers, and procurement managers
  3. Best Practice as a world class customer (Benchmark)
    • Identify and interview world class customers
    • Interview suppliers randomly chosen from these suppliers

Information from these three sources can be analyzed to identify the behavior framework and shifts necessary to become a world class customer. A communication plan is necessary to distribute the message to the points of contact so that there is a consistent understanding of the expected behavior.

The profile of a World Class Customer includes:

  • OPEN COMMUNICATION
  • TRUST
  • PREDICTABILITY/RELIABLE
  • SHARED VISION/CULTURE
  • CONSISTENCY THROUGH THE CYCLES
  • FINANCIALLY ROBUST
  • INNOVATIVE
  • LONG TERM RELATIONSHIP FOCUS

NOTE: Additional detail and discussion including charts and graphics will be provided at the NAPM Conference presentation. It will also include a review of actual supplier alignment programs that have been mutually beneficial.

References

  1. Asmus, D. ,Griffin, J. Harnessing the Power of Your Suppliers, 1993 Number 3, McKinsey & Company, Inc. , Quarterly, New York, NY.
  2. Badaracco, Joseph, H. Jr.(1991) The Knowledge Link - How Firms Compete Through Strategic Alliances, Harvard Business School Press. Boston, MA.
  3. Cokins,G. , Stratton, A.,Helbling, J. An ABC Manager's Primer Straight Talk on Activity Based Costing. (1993) Institute of Management Accountants. Montvale, NJ.
  4. Clough, Thomas, Supplier Relationships Projects - Behavior Assessment, Gemini Consulting, Inc. (1995)
  5. Lewis, Jordon, D., The Connected Corporation - How Leading Companies Win through Customer-Supplier Alliances. (1995) The Free Press
  6. Lynch, Robert, P. Business Alliances Guide - The Hidden Competitive Weapon. (1993), John Wily Sons, Inc. New York, NY.
  7. Harper,R. Succeeding As A Self-Directed Work Team, (1994), MW Corporation, Mohegan Lakes, NY.
  8. Quinn, James, B. , Intelligent Enterprise - A New Paradigm for a New Era. (1992), The Free Press, New York, NY.

Back to Top