Supplier Development Strategies
Supplier Development Strategies
Supplier Development Strategies
Supplier Management
and Development
Chapter 9
Sharing technology
Providing performance incentives
Promoting competition among
suppliers
Providing necessary capital
Directly involving buyer personnel
Training
Process improvement
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a publically accessible website, in whole or in part. Purchasing & Supply Chain Management, 5e
Steps to Supplier Development
7. Reach
8. Monitor status
agreement on key
of projects and
projects and joint
modify strategies
resource
as appropriate
requirements
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a publically accessible website, in whole or in part. Purchasing & Supply Chain Management, 5e
Identify Critical Commodities
Do externally purchased products and
services account for > 50% of product
or service value?
Is supplier existing or potential source
of competitive advantage?
Does buyer currently purchase or plan
to purchase based on total cost vs.
initial purchase price?
Can existing suppliers meet buyer’s
competitive needs 5 years from now?
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a publically accessible website, in whole or in part. Purchasing & Supply Chain Management, 5e
Identify Critical Commodities
Barrier
Buying company’s purchase volume from
supplier does not justify development
investment
Solution
Parts standardization across products
Single sourcing
Barrier
No immediate benefit is evident to buyer
Solution
Pursue small wins to build momentum
Barrier
Importance of purchased item does not
justify development efforts
Solution
Take a longer-term focus
Include integrated solutions to be used in
future designs
Barrier
Lack of executive support in buyer
organization for supplier development
Solution
Prove benefits
Document and publicize
Barrier
Supplier is reluctant to share information
on costs or processes
Solution
Create ombudsman to deal with non-
contractual issues
Barrier
Confidentiality inhibits information sharing
Solution
Establish confidentiality agreements
Non-disclosure agreements
Exclusivity agreements
Engage in ethical behavior
Barrier
Supplier does not trust buyer
Solution
Spell it out with properly executed written
agreement
Barrier
Organizational cultures are poorly aligned
Solution
Adapt new approach to local conditions
Supplier partnership manual
Training
Barrier
Not enough inducements to participate are
provided to supplier
Solution
Designed-in motivation
Future business
Financial incentives
Payment terms favorable to supplier
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a publically accessible website, in whole or in part. Purchasing & Supply Chain Management, 5e
Supplier-Specific Barriers
Barrier
Lack of commitment on part of supplier’s
management
Solution
Implement only after commitment
Joint development of goals and objectives
Determination of potential costs and benefits
to each party and how they will be shared
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a publically accessible website, in whole or in part. Purchasing & Supply Chain Management, 5e
Supplier-Specific Barriers
Barrier
Supplier’s management agrees to
improvements but fails to implement
proposals
Solution
Supplier champions
Key supplier employee
Training in tools and techniques
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a publically accessible website, in whole or in part. Purchasing & Supply Chain Management, 5e
Supplier-Specific Barriers
Barrier
Supplier lacks engineering resources to
implement solutions
Solution
Direct on-site support from buyer
personnel
Barrier
Supplier lacks required information
systems
Solution
Direct electronic data interchange (EDI)
support
Direct financial assistance as required
Training on hardware and software
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a publically accessible website, in whole or in part. Purchasing & Supply Chain Management, 5e
Supplier-Specific Barriers
Barrier
Supplier is not convinced development will
provide benefits
Solution
Let suppliers know where they stand
Supplier evaluation and measurement system
View supplier performance vis-à-vis
competitors
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a publically accessible website, in whole or in part. Purchasing & Supply Chain Management, 5e
Supplier-Specific Barriers
Barrier
Supplier lacks employee skill base to
implement solutions
Solution
Establish training centers
Develop supplier skill levels
Provide human resource support
Co-location and direct involvement
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a publically accessible website, in whole or in part. Purchasing & Supply Chain Management, 5e