Enhancing supplier relationships
Withstand the pressures created by overworked resources, and strengthen your relationships with external contacts.
THE DAYS OF BEING EVERYTHING to each customer are fading. Companies cannot afford to maintain noncore services that drive up overhead costs. The shift to removing noncore services is noteworthy, because companies are relying more on external suppliers. To “outsource,” “partner,” and “team” have become fashionable trends. This means that suppliers are now strategic resources, not merely providers of products or services. Companies often solicit participation from suppliers during the business development phase in order to properly plan and implement projects. As one project is successfully completed, many companies and their suppliers begin collaborating on the next opportunity.
Project managers are responsible for assembling winning teams and defining the required resources. As a company's backlog increases, the availability of key staff and resources diminishes. This trend leads project managers in search of help. The creation of long-lasting relationships with suppliers is a solution that requires effective communication and the sharing of information. For the purposes of this article, let's define suppliers as all consultants, subcontractors, vendors, and specialty trades that are retained from outside firms.
The days of accepting low-bid offerings are quickly vanishing. Sure, it remains essential to retain suppliers that offer fair and reasonable pricing; however, the selection criteria also include performance metrics. Compliance with the specifications and having the lowest price may not be enough to add value to a project. Project managers want responsive suppliers that will collaborate and share creative solutions. This requires commitment, partnering, and effective communication.
Project managers routinely find themselves entangled with procurement agreements and contract modifications when working with suppliers. Nowadays, the type and complexity of the agreements may necessitate assistance from legal specialists, buyers, and contracting experts. Procurement may be the single-most demanding responsibility for project managers today.
The Networking Frenzy. A true measure of intelligence is not only what you retain, but also—perhaps more so—whether you know how to find solutions and implement them. Welcome to the networking frenzy, a fast and reliable way of retaining help. When internal resources are stretched near capacity, or a team is in jeopardy of not achieving expectations, look to outside suppliers for help.
Suppliers can be integrated with a project team in many ways. Project managers may retain suppliers to address resource imbalances, to obtain products or services that are not available from their company, or to enroll technical expertise. In order to make sound decisions when outsourcing work, project managers should be familiar with the capabilities of many companies in relevant work areas and disciplines. These external contacts should be employed, as necessary, to supplement any project team.
Knowing where to obtain assistance and how to approach suppliers is a challenge to all project managers. The response to this challenge may vary from one organization to another. To establish or expand a network of suppliers, it is important to retain vendor information, contacts, and references. If a procurement solicitation or supplier list is unfamiliar, consider reviewing the scope or capabilities with colleagues. The combined knowledge and experiences of others will generally facilitate retaining the best supplier. Additional information can be obtained by accessing supplier databases, contacting trade or industry associations, and reviewing business journals, directories or buying guides. Many companies maintain databases to tabulate supplier information and performance measurements; most include specialty data pertaining to small, disadvantaged, or woman-owned businesses. Be cautious, however, as the accuracy of the databases can be flawed if the feedback and input is not provided in regular, timely intervals. Use all of these techniques to expand your network of contacts so that assistance is only a phone call (or e-mail) away.
The most effective technique for assessing suppliers is through previous work experience. Word-of-mouth and referrals are still reliable tools to evaluate performance. Knowing the capabilities and limitations of suppliers will pay handsome dividends during implementation. But even the best suppliers can become overcommitted, and project managers must be able to recognize this occurrence and take necessary actions
Several factors can influence potential suppliers, such as company name recognition, visibility of a project in the marketplace, and the attractiveness of the work (to be contracted). At times, companies can leverage multiple opportunities to encourage participation or interest. By proactively seeking relevant information from suppliers and then soliciting their participation to bid, most will be responsive to the next request.
New Trends in Procurement. There are numerous types of agreements, alliances, or partnerships for retaining external suppliers. The specifics of these agreements are beyond the focus for this article and therefore not discussed here. The quest for most project managers involves integrating the suppliers with in-house resources, while maintaining the delivery, quality and costs expected by the customer.
In the past, low-priced offerings were accepted. Today the objective of low cost remains, but the method for arriving at competitive costs has changed. Companies are working together to define scope, schedule, and performance measurements. Perhaps most noteworthy, suppliers are participating in preplanning activities with companies to develop creative solutions. This type of involvement fosters mutual gain and long-term business relations.
The management of supplier relationships can dictate the success of a project. Project managers should demonstrate the importance of effective communication and leadership. The project teams should promote synergy and share relevant information with suppliers, as required, to achieve customer goals.
Consider these objectives when establishing a supplier relationship:
■ Carefully define the Statement of Work. It is essential in order to meet the expectations of the customer, and to avoid claims or disputes.
■ Balance the amount of work with the capabilities of the supplier. Too large or small of an assignment may lead to performance problems.
■ Provide adequate time for the supplier to respond to the solicitation. Rushing the supplier's response will undoubtedly result in less competitive costs or overlooked items.
■ Establish reasonable terms. Take into consideration the scope, the amount of risk, and the project's technical requirements. Also, clearly define pricing and risk sharing parameters such as bonding, insurance, and payment terms.
■ Solidify delivery. Insist on responsiveness, open communication and collaboration, and resolve issues in a timely manner.
■ Communicate the business strategy, project objectives and milestones. Let the suppliers participate and make a difference.
■ Manage the relationship. Share information, build credibility and keep an eye toward the next opportunity.
Creating and maintaining effective supplier relationships is another example of how today's project managers must “own” their projects, and thereby reduce the downside exposure caused by changing project environments.
Relationship Building. Often, companies will examine their best clients and strategize about ways to improve performance and secure new business. Many solicit feedback or appraisals pertaining to past performance or customer satisfaction, and then strive to redefine and improve the relationship. Similar evaluation techniques can prove valuable toward improving external supplier relationships. Many project managers face the pressure of completing one assignment and swiftly moving on to another, and as a result the post-performance appraisal is forgotten. Even when the appraisal is prepared, the feedback isn't always shared with the supplier to benefit the relationship in the future.
Consider the development of a supplier relationship in terms of succession planning. Instead of grooming the next leader to assume your position, train and develop the supplier to deliver continuity and enhance the next business opportunity. To retain new clients, most companies strive to know their customer's business intimately, along with how they “buy” and what makes them successful. The same philosophy holds true for managing supplier relationships. The company and the supplier should strive to be advocates for each other and align the relationship toward common goals.
Companies need to regularly identify and assess the capabilities of suppliers. It is essential to expand the network and provide opportunities to new firms, meanwhile challenging the suppliers that regularly exceed expectations. Procurement should be more than a project startup activity. Here are a few suggestions to improve a supplier network:
■ Sponsor a breakfast meeting for suppliers and provide information on contracting, technologies, or similar topics of interest.
■ Support small business fairs and encourage participation from your company to identify and learn more about new businesses, including small and/or disadvantaged firms.
■ Promote the distribution of supplier information between staff located at different geographical offices. Hold technology-transfer sessions at lunch or other common meetings.
■ Try to meet periodically with suppliers and discuss ongoing work as well as upcoming business opportunities.
“PARTNERING FOR PERFORMANCE” is not just an overused phrase. Partnering can be casual, informal business relations. The climate is ripe for companies to establish reliable working relationships with suppliers that compliment your own. By developing long-lasting supplier relationships, companies will be better prepared to assemble winning teams and thereby minimize the impacts caused by changing project environments. ■
Todd K. Walles, PMP, construction department manager for Roy F. Weston Inc., specializes in environmental remediation, redevelopment and construction. He is also a civil engineer and a Certified Hazardous Materials Manager.
PM Network • October 1998