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How NOT to Launch a Supplier Development Initiative

July 5, 2016
Don’t outsource the heavy lifting of defining your strategy or initiative to academics or process-oriented consultants.

This column will focus on a topic that could cause some discomfort among companies in the process of launching a new/updated supplier development function since it could be seen as throwing skunks on the table relative to a current roll-out. Sorry, but I’ve been calling things as I see them for too long to change now and I’ve seen too many supplier development initiatives that were either stillborn or ended up as afterthought functions as a result of not being positioned to contribute significantly to overall company benefit. With that being said, please take my comments as constructive rather than critical.

The main point of my last column was that the role of OEM supplier development should be to align strategic supplier operations with customer strategic plans. If you dig down into it, this implies a lot of the work with a significant amount of it being both internal and necessary prior to any actual supplier interactions. Some of this laying-the-ground-work must actually be done prior to finalizing your supplier development strategy since to be effective, initiative deliverables must be formally bought-off on by departmental and company management. If you don’t get upfront agreement on how supplier development will dovetail with existing functions, your initiative will probably never play a significant role at your company.

Laying groundwork requires a strong internal champion and here is where I introduce what could perhaps be perceived as my biggest skunk in this article. In my column “The Case for Supplier Development,” I describe how many existing OEM supplier development functions have a primary responsibility of making sure that enough capable small/disadvantaged suppliers (S/DS) are available to source from such that the OEM’s product S/DS content level qualifies for governmental purchase. Because of this and the fact that S/DS suppliers often need assistance to achieve minimum acceptable capability levels, supplier development functions are often managed by S/DS organizations. In my experience this is a mistake. Why?

First, let me start by saying that the S/DS function does play a necessary role for many companies. But how many of you can truly say that S/DS holds a significant position within your supply management organization, i.e., has a “seat-at-the-table”? I doubt many. So, the fact is that S/DS will usually not have the clout or exposure necessary to effectively do the earlier cited internal heavy lifting. This means that the process changes and strategic alignments that need to take place within a supply management organization—and for that matter, the overall company—will not take place, leaving your supplier development function to operation in relative isolation. By relegating supplier development organizationally under the management of the S/DS function, it will never have the strong overall strategic influence you are looking for.

Second, let me point out that the traditional role of S/DS in most companies is more one of “advocacy” than anything else. Consequently, S/DS management is chosen based more on their relationship management skills rather than on their technical understanding of supply chain dynamics and manufacturing fundamentals. Sure, S/DS-led supplier development functions can usually cite isolated instances of having provided supplier competitiveness improvement assistance. This, however, is not what we’re looking for in Next Generation Supply Management. Improvements yielded by such management are incremental, at best. Instead, we need to be talking about a supplier development initiative that will be responsible for an overall supply base realignment, i.e., one that can have a step-function impact on their customers’ financial results. Having initiative leadership with the proper background and positioning is critical to making this happen.

So who should be chosen to lead a supplier development initiative launch? What is needed is an up-and-comer within the organization who has a strong background in manufacturing and at least a bit of a thick skin. Make no mistake, crowbarring a strategic new function into an existing supply management hierarchy will upset many established apple-carts and probably result in significant internal criticism and pushback. Believe me, I have the physical and emotional scars such that I know whereof I speak!

Having a person with these attributes will give your initiative a chance of—but not ensure—success. Not having this type of person leading your initiative will probably result in it becoming either that stillborn function I referred to earlier or one that is an afterthought in an overall supply management scheme-of-things. The last thing you want leading any new initiative is an L.I.N.O., i.e., Leader In Name Only. Putting someone in charge that does not have the necessary personal characteristics necessary for developing or launching a new initiative—specifically one who is willing get their hands dirty performing basic work elements—will cause it to fail.

Heavy lifting is also required outside of the OEM organization. Once a supplier development strategy and process that aligns with the company’s strategic aims are defined and agreed to internally, you need to consult with your top strategic suppliers to gain their feedback about whether it is practical. Making a program palatable to the important suppliers whom you depend upon and know will be in your supply base for the foreseeable future is critical to an initiative’s success. Call these suppliers in, lay out your strawman proposals—including metrics—and take their suggestions for change as constructive, and not as criticism.

If 80% of what you lay out ends up in your final program, you did a great job of aligning your initiative with something that your supply base is capable of taking on. On the other hand, rolling out a program they are not ready for makes very little sense. Getting supplier input into your supplier development program will give them ownership, which is always good when rolling out something new. Not getting this input will likely end up generating supplier stonewalling as many go through the motions to try to keep you happy while also resisting having to make any real operational change.

A point needs to be made here: Don’t try to outsource the heavy lifting of defining your strategy or process to academics or process-focused (e.g., Lean) consultants. They won’t understand your company’s culture or its strategic plan, i.e., what you are trying to do. More importantly, they also won’t have understanding of your supply base and their individual situations. Further, while most will be able to cite a prior work record of working with individual firms, few will have any significant experience in working with supply chains that they can point to.

That’s not to say that you shouldn’t consult with outside experts in developing the details of your program, but realize you will need to do significant tailoring of what they offer in order to develop your own successful initiative. If you over-rely on such resources you’ll end up—at best—with a “vanilla” approach that won’t really align with program intentions and in the end, will lead to “vanilla” results (again, at best).

Program launches must be well planned and supported. Don’t plan on shooting-from-the-hip during the roll-out of your program to suppliers. Once you’ve defined the process you intend to use, spend significant time and resources in both documenting it and providing resources that your suppliers can reference. Consequently, an initiative website with videos, instructions, guidebooks, forms, etc., should be developed and available before rolling out the initiative. Why? There are at least a couple of reasons:

• First, suppliers will need to sell the initiative to the powers-that-be within their organizations and you need to be the primary help to them in doing so by providing them with the material needed to make that case.

• Second, while you will have supplier development resources available in the implementation of your initiative, you’ll never have enough of them to do all of the work that will be needed across all of your strategic suppliers. In fact, much of the work will need to be done by supplier resources with your supplier development engineers acting more as consultants/project managers than performers of tasks. So any material you can provide suppliers that facilitates the doing of actual project work will position them for implementing and owning the needed internal improvements.

• Finally, providing such resources will reinforce with suppliers the importance your company places on the initiative, i.e., it will demonstrate to them that it’s not just another program-of-the-month.

My last skunk involves OEMs needing to “walk the walk,” not just “talk the talk.” If you are rolling out a supplier development strategy that you can tell your suppliers is also being implemented to your internal operations, that will go a long way in selling them on the initiative. Further, if you can say that the same goals and metrics are being used to measure internal operational success as are being applied to the supplier performance, you’ll go a long way toward getting buy-in from suppliers to what you are looking for them to accomplish.

For instance, if you are rolling out a supply base cost reduction goal but your own factories are not operating under the same cost reduction expectations, your initiative will lose a lot of credibility and likely be seen as just another profit-grab. And, needless to say (if you’ve read my previous columns), having a piece-price reduction as the primary basis of a supplier development initiative is probably the best way—for a variety of reasons—to ensure your initiative will be stillborn.

So, there’s my formula for how NOT to launch a supplier development initiative along with ideas on what you need to do to position supplier development to be an effective part of your supply management organization.

My next column will discuss in-shoring—specifically, an important factor that current in-shoring initiatives seem to be missing.

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