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Keys to Becoming Your Supplier's Best Customer

Posted 04-26-2010 at 12:26 AM by 95th Annual
According to Elaine Whittington, C.P.M., CPCM, educator for G & E Enterprises – who, in 1966, was hired as Lockheed-Martin’s first female buyer – the customer/supplier relationship has taken on a much different look and feel in today’s market.

In her session this afternoon, “Keys to Becoming Your Supplier’s Best Customer,” Whittington emphasized that strong supplier partnerships are now a must. And, she pointed out, this relates back to Angel Mendez’s opening keynote-session (http://www.ism.ws/bulletin/blog.php?b=21) message of being the toughest, yet best, customer.

“We must learn the necessary steps to form effective supplier councils, the importance of clear and concise communication, and how to effectively use performance metrics to improve results,” she told attendees. “Becoming an important customer allows you to obtain better product, delivered on time, at the ‘right’ price.”

As Whittington explained, it used to be that a buyer’s position with suppliers was based on “mini-dictatorship.” Back when she worked for Lockheed-Martin, Whittington admitted she fell prey to this mid-set herself. “All of a sudden, instead of being 4’11”, I was 6’2”!” she joked. “After all, I had the purchase order number!”

At that time, rarely was consideration given to working with a supplier as part of a procurement team; in fact, she said, suppliers were often viewed as the enemy, liars and untrustworthy. “There was also a belief that they’d disappear as soon as your deal was done,” she recalled. As a result, only bare-minimum program details were typically shared.

Today, however, partnering, supplier alliances and strategic alliances have become essential to increasing an organization’s competitive in the marketplace. “Now, more often than not, the supplier is liable to be involved at the very onset of a project,” Whittington said. A few of the advantages of this approach are suppliers’ willingness to help with the best design ideas and their compulsion to work hard to support and solve problems.

“It’s this concept which places much more emphasis on the need for clear, concise and frequent communication,” she continued. According to Whittington, effective communication addresses a project’s progress and problems, as well as the supplier’s challenges, financial health and needs for assistance. “We need to create an environment which allows them to share their problems, knowing they’ll get help,” she advised.

“And, we must always remember that communications isn’t just talking; it also includes listening,” Whittington continued. “In fact, if you only walk away from this presentation with two words, let them be ‘communication’ and ‘listening.’”

THE EMERGENCE OF THEORY Z

Next, she discussed Douglas McGregor’s theory of management, which breaks management styles into two groups: theory X and theory Y. Theory-X managers are strict, based on the concept that people want and need to be told what to do. In contrast, theory-Y managers tend to be more lenient, believing that people naturally enjoy working and will seek out extra duties without reason or incentive.

“Then, a professor at UCLA came up with a new concept: theory Z,” she continued. “Even though he applied his theory to management, it could easily be used for motivating suppliers.”

When it is, theory Z supports a handful of assumptions about suppliers:
• They would prefer a long-term working relationship with supply management.
• They would prefer to have collective decision-making on the project.
• They would appreciate individual responsibility in the areas under their control.
• They would welcome evaluation of their performance.
• They would welcome a buying organization’s concern for their welfare.

Whittington also promoted measuring a supplier’s performance, sharing the results with management and that supplier, and insisting upon improvement as necessary. At minimum, she asserted, a supplier should be measured on its open orders, purchase order commitments, late order recovery, past-due backlog and quality.

“The supply chain professional should also make sure success is rewarded for those suppliers who are able to improve their performance,” she added. And, when suppliers fail to deliver, Whittington promoted the use of forms that require them to lay out the problem and their proposed solutions.

Wrapping up her session, Whittington reiterated her belief that treating suppliers with dignity and respect pays off in reduced costs (at least 20 percent) and better on-time performance (at least 17 percent). Other payoffs include less inventory, fewer stock-outs and improved final quality.

“Just remember that ‘best customers’ do certain things very well,” she concluded. “They listen, communicate, negotiate fairly, make themselves available, share data, offer necessary assistance, consider suppliers as part of the team, treat them fairly, and adhere to the contract.”
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