We all know that supplier performance management reviews (PMR’s) are a good thing. Not only do they provide the building blocks for a healthy relationship, through communication, they are a vital aspect of continuous improvement between two companies. PMR’s are usually where the supplier and customer get together to review their business relationship, usually at a senior level. The frequency of the reviews often depend on the nature of the relationship and the products being supplied but usually take place once a month.
However, for many organizations, the PMR unfortunately acts as a box ticking exercise (we need it so we do it, not for a particular purpose). For a PMR to add value then it needs to drive some form of results. The worst kind of reviews form as a backslapping activity where the supplier and buyer come together to review the status of something they already know about without looking at areas that can be improved or at issues that could, perhaps with a little work be eradicated.
But what should your objectives be? In a truly equal relationship then the review shouldn’t be to just “beat up the supplier” but to serve as a platform for review some of the following:
· Performance issues
· Forecasts and assumptions
· Risks
· Change
So here are our 5 key questions to ask at a supplier PMR.
1/ How can we help facilitate performance improvement
Whilst you’ll probably have some form of performance metrics to review all too many organizations merely touch the surface of what’s going on. In your PMR do you
a) Share your objectives not just the current status
b) Understand the key issues underpinning performance.
c) Understand the plan of how you’ll address the gap between current state and target
d) Document the actions required to get there?
2/ How can we help reduce risk
Risk remains one of the key areas of supplier relationship management. Unmanaged risk can stop the supply of parts dead in their tracks. Your PMR should by default include an element of risk assessment and review of mitigation steps, even if it’s just to ensure that there’s nothing new that’s going to bite you in the ass.
3/ What are the improvement opportunities exist that suit both our organizations
There’s bound to be things that can be done better. In most relationships the majority of these may, commercially, only suit one side. The trick into developing supplier relationships is finding those avenues that can improve things for both sides. This may take some negotiation and discussions but it’s worth it as it provides the platform where both parties will put effort into making things happen.
4/ What are the key issues that we (the buying organization) cause
Perhaps linked to the above, what are the issues that affect your key supply chain triggers (maybe these are price, delivery performance and Quality?). It’s usually helpful to document these by
· What’s the issue (e.g. Late to purchase order requirement)
· What’s the perceived cause (e.g. Last minute schedule changes)
· What’s the root cause (e.g. Forecasting issues)
Having a list of these can drive improvement actions.
5/ What issues can the supplier assist us in solving
Your supplier usually can provide a lot more than just parts. They are usually experts at manufacturing the part (or obtaining it) for example and as an aside to their key task may be able to offer a range of supplemental services that can help your business.
So that’s our 5 questions? Do you run PMR’s? What key things do you ask your suppliers? We’d love your feedback in the comments section below.