OMNIA Partners Blog

Managing Supplier Risk: Tips from Category Managers [Part 2]

Posted by Gary Como on September 04, 2013

Want to know how to be more attractive and less high-maintenance for a better supplier relationship?

Yesterday I posted the first four examples of supplier risks and how to avoid them through the strategies used by our own Corporate United category managers. So here are four more you need to watch for and how to manage them to lessen complicated (and sometimes expensive) issues.

Risk of no supply/disinterest: The risk of suppliers not wanting your business

Have you considered what would happen if you took a category out to bid and had no replies to your RFP? If it turns out that no one wants to do business with you, the RFP you just conducted gave your current supplier the green light to raise prices or end your relationship.

If you’re known for brow-beating your suppliers or being extremely challenging to service, consider what you can do to make yourself a more attractive customer before going out to bid.

Risk of limitless suppliers: The risk of having too many suppliers

This might not initially seem like a risk, but consider an industry like temporary staffing. There are big suppliers, little suppliers, diversity suppliers, national suppliers, local suppliers, and…and…and…!

If you conduct an RFP in this space, you run the risk of not inviting the right suppliers – leaving you with an unsatisfactory relationship – or inviting too many suppliers – making the RFP process too big to properly manage. Having an excessive number of suppliers to choose from requires a great deal of due diligence.

Risk of uneven expectations: The risk of having higher expectations for the supplier than the supplier has for itself

Some suppliers are content with merely meeting the expectations listed in the agreement; as long as they hit the SLAs, they feel they’ve done their job. However, most companies have unstated expectations of their suppliers, and this leaves the supplier at a disadvantage. By developing a collaboration card with your supplier and regularly reviewing it with them, you can create a forum to discuss those expectations.

Relationship risk: The risk of having a shallow relationship with the supplier

Even if you have communicated all your expectations to your supplier, that understanding is likely only as deep as your main contact. Establishing deeper relationships and knowing multiple people across the supplier organization is a good way to solidify the buyer/supplier relationship.

Keep in mind that when people change – be it your main contact, the supplier’s leadership team or the person filling your order – everything has the chance to change. Or perhaps your supplier decides it wants to alter how it goes to market. Continually managing and growing your relationships will help lessen the risk associated with these changes.

So now what?

Mitigating all these risks for every one of your company’s suppliers would be a full-time job. To make it a manageable task, take the time to conduct a formal evaluation of your suppliers. With the results of this evaluation, you can objectively determine which suppliers are most strategic and/or pose the most risk. Develop a regular risk assessment schedule for the most high-risk and strategic suppliers; this will enable you to spot issues as they arise and resolve them quickly.

Topics: Group Purchasing Organization, Procurement

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