ProPurchaser Best Practices

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Fishing with Suppliers

Fishing With Suppliers

I once had a very smart boss whose favorite expression was "Fish where the big fish are!"

Great advice: especially for busy people, who constantly need to re-prioritize their work, because they have no hope of ever getting everything done!

Sound familiar? Read on.

The Best Fishing Holes for Cost Savings

So where do the "big fish" lurk for reducing costs for the products and services we purchase - in better pricing, in longer terms, in faster order processing, in speedier delivery? All important yes, but in my experience they are not the trophy-fish.

The best cost-savings opportunities are to be found in your suppliers’ organizations: knowledge and ideas inside the heads of their managers, engineers, operations and planning staff.

These people are in an excellent position help reduce your costs for two reasons:

  1. They are familiar with other customers’ operations and exposed to processes and practices that often prove very useful to your company. While you can’t expect them to reveal confidential information, you can certainly ask for suggestions, based on their personal knowledge and experience.
  2. They have profound technical knowledge about their own products. This puts them in an ideal position to suggest alternative specifications or practices that can cut costs without sacrificing quality.

You have to do more than just ask

Simply because you are the customer doesn’t mean that tapping into a vendor’s in-house expertise is a given; it does, however, mean that it is possible. People are a limited resource in any organization, and your vendor’s senior managers are likely to need some convincing before making their people available.

This is your job: to make them feel that investing key people’s time is a good use of their resources. And to succeed, you will need to lead a process that results in a deeper kind of buyer/seller relationship. The 4 steps below outline such a process.

Step #1 – Begin with Your Sales Rep

Enlist the aid of your sales rep; fortunately, most are eager to help. Explain the challenge. For example, you might say that senior management has issued an edict to reduce costs by 10% over the next 12 months. Stress that they expect Purchasing to take a leadership role.

Point out that this is definitely no easy task; and you can sure use any help you can get. Make it clear that this is not a ploy to extract lower prices at their expense. To the contrary, you want his company to be profitable - financially stable suppliers make your supply-chain stronger.

Explain that, rather than squeezing margins, you want to squeeze waste and inefficiency out of the way you do business together, and this clearly requires both organizations pulling in the same direction.

Suggest a meeting attended by management, engineering and operations staff from both companies. The purpose will be to discuss ideas, and jointly agree on an action plan.

Step #2 – Plan and organize the meeting

With your supplier’s agreement in principle in hand, approach your own colleagues: specifically, the counterparts of the people you want to attend from your supplier’s organization. Meet individually with each person to explain the purpose of getting together with the vendor, ask for their input, and agree upon their role in the process.

For important suppliers, invite your CEO to say a few inspiring words about your company’s strategic direction and goals. The CEO’s job is to impress the supplier’s team and persuade them to "hitch their horses to your company’s wagon". In addition, your CEO’s attendance will almost surely mean your supplier’s CEO will be there too. A very good thing, since he or she will be highly influential in deciding whether or not to make their people available.

Next, call your sales rep. Tell him who will be attending from your side and offer two or three meeting-dates. Ask him to confirm a date and the names and titles of his company’s attendees.

After the rep gets back to you, email an invitation to everyone, attaching an agenda. Begin with a short statement of the purpose of the meeting (e.g. Explore cost reduction ideas and develop a go-forward plan) and then spell out the agenda in some detail. Here is an example:

  1. Overview of your company’s strategic direction and how your supplier’s company fits in (your CEO - 10 minutes)
  2. Overview of your supplier’s strategic direction and how your company fits in (their CEO – 10 minutes)
  3. Brief history of the business relationship between both companies and the opportunities/challenges that lay ahead. (you – 10 minutes)
  4. Discussion of cost-savings ideas (all- 60 minutes)
  5. Wrap-up (you – 10 minutes)

Step #3 – Run the Meeting – encourage brainstorming, take minutes, gain consensus on action-items

You have important two jobs during the meeting.

First, create a constructive atmosphere that encourages the free flow of ideas.

Start by dispelling any fears your supplier’s people may have about why they are really there. Explain that they were invited specifically because you and your colleagues respect and value their capabilities. The meeting is about what you can do together: how you can become a better customer and how they can become a better supplier. Everything is open for discussion; there are no "dumb ideas"; encourage constructive criticism.

Remind everyone about the meeting’s purpose, and re-state the specific goal: e.g. reduce costs by 10%.

Make it clear that the overarching goal is to remove inefficiencies and waste so that both parties benefit.

Your second job is to nail down constructive ideas, decisions and action-items as they occur.

As you chair the meeting, be careful not to take the limelight. Let others do most of the talking, but make sure they stay on schedule and topic.

All the while, you should be capturing and organizing the ideas, decisions, and action-items that surface during the meeting.

During the wrap-up, read your notes aloud and gain agreement. Make especially sure to highlight action-items: e.g: "Form a team to reduce short-shipments", or "Form a team to review specifications with a view to reducing material costs".

Finally, thank everyone for coming, express appreciation for their input and ideas, say how much you and your colleagues are looking forward to working with them, and state that minutes will follow.

Step #4 - Follow up

Email the minutes the very next morning.

Restate the meeting’s purpose and the specific goal(s) you are all trying to achieve. Then briefly describe key ideas and decisions that were taken. Most importantly, clearly lay out a schedule for each agreed to action-item: the goal, who is responsible (usually a team), and a date for the first progress report. (e.g. Reduce material content for plastic parts by 5% - Sam, Betty, and George – progress report by March 1)

Writing minutes is not enough. It’s your job to make sure the teams succeed. Retain (gentle) control between meetings. Monitor progress with regular phone calls. Get involved if you can by offering to help (data gathering, removing obstacles, preparing PowerPoint slides, etc). At the end of a project, make sure the credit goes to the team members. Happy team members make great recruits for future projects.

Yes, it’s a lot of work….but well worth it

Fishing with suppliers certainly takes time and effort on your part. But it’s usually well worth it……look what you gain:

  • A competitive advantage for your organization, because of lower costs and a stronger supply-chain
  • More rewarding work for yourself as you create tangible value for your organization
  • Respect from your colleagues and appreciation from senior management
  • And a stringer of trophy fish to show your boss at performance appraisal time

Addendum – Suggestions for "First-Timers"

"Great idea in theory, but how will I ever get my own engineers and management on board? They’re really busy, don’t see the value, and won’t make the time." If your organization has never worked closely with suppliers before (and hence doesn’t understand the benefits) this might be your dilemma.

The solution is to do more up-front selling inside your own organization before approaching your sales rep. Set up face-to-face meetings, outline what you plan to do. Ask which suppliers they think have the most impact on costs from the point of view of problems created by suppliers, importance of the supplied items to overall costs, etc. Afterwards, talk to the rep; and then go back to your own people as meeting is being set up.

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