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- Nov. 30, 2006 -

 

Supply Chain Best Practice Tip:  Implementing “Voice of the Supplier” Programs

 
 

Suppliers can offer suggestions that can offer significant supply chain improvements – but you have to ask

 
 

 

SCDigest Editorial Staff

Leveraging formal “Voice of the Customer” programs to improve product and service delivery has achieved growing adoption across businesses, driven especially by Six Sigma initiatives.

“Voice of the Supplier” initiatives are also gaining strength, but to this point have received comparatively little attention and adoption.

Understanding the perspectives of suppliers about how products, processes, and costs can be reduced can deliver significant value.

That’s easier said than done, of course. Supplier dialog tends to focus on price, and is often characterized by a relationship that is inherently adversarial in nature. Yet, as was noted in a report last year by management consultants AT Kearney, “Companies that take the time to listen to their suppliers can eventually realize rewards beyond cost savings. Often they can generate new ideas and concepts, determine how their performance stacks up against their best practice competitors, and identify areas and processes on which to focus resources and attention.”

Suppliers Often Have a Wealth of Knowledge

The fundamental premise of “Voice of the Supplier” is that the supplier may have insight into several areas that can provide ideas for improvement. These include:

  • Their domain expertise in the product or service being provided
  • Experience with other customers in the industry (often your competitors)  in terms of best and/or emerging practices
  • As a perhaps valuable observer of your internal processes and approach

Suppliers often face the same challenges faced by the customers. They may have insight into procurement processes, product development, and manufacturing. In each of these and other areas, they may have insight on where you excel and where you are trailing the pack.

The Art of Listening

Given the inherent forces in a vendor-supplier relationship that work against actively listening to supplier feedback, it is critical to thoroughly consider the types of supplier input that can add value, and to know how to listen effectively.

Some areas of the relationship which should be considered in listening to the voice of the supplier include the following:

  • Misalignment: When perceptions of requirements are not aligned, it causes problems for both buyers and sellers
  • Impact of changes: Companies often make changes to designs, product requirements, packaging, supply chain/logistics and other item attributes without asking suppliers the impact on their costs and hence ultimately prices
  • Product design: Are there opportunities to reduce costs or improve functionality?
  • Collaboration: What are other customers of the supplier doing well, especially others in your industry? Are they sharing forecasts, automating transactions, using supplier managed inventory, etc.?
  • Importance: How important is your relationship to the supplier? How attractive is your business? Realizing that suppliers will generally devote their best resources to their best customers, it’s good to know where you stand.

There are multiple mechanism that can be used to develop a “Voice of the Supplier” process. Most companies generally start out with simple conversations with key suppliers. In these dialogs, it is important to ensure the right personnel from both buyer and seller are at the table. For example, it is unlikely that the supplier’s sales person will have detailed insight into how a components product design can be improved to reduce costs - a design or manufacturing engineer is required. It is also important the right team members in the buyer’s organization hear the feedback, either directly or through distributed reports.

Eventually, use of formal surveys (today, generally on-line) can also provide important insight and allow the Voice of the Supplier initiative to “scale.” Again, it is important in these surveys to ensure feedback is obtained from multiple touch points at the supplier (even if one person, such as the account representative, consolidates the answers). Companies with well-developed Voice of the Supplier initiatives generally first use on-line surveys, which are then supplemented by follow-up personal discussions to drill into important areas at a deeper level.

Kearney also recommends use of a pilot program with a key supplier or two to work out the kinks and achieve proof points that be used to generate support for a broader effort.

While the pilots can take many forms, they will most often focus on joint supplier-buyer process improvement programs or complexity reduction programs.

As the Kearney report concludes: “Companies that engage their suppliers may find that a simple policy change or equipment adjustment could save millions of dollars – changes that would not have been considered had the company not reached out to, listened to, and shared ideas with key partners.”

Do you believe Voice of the Supplier programs can have real value? What is your company doing? What tips would you add to drive success? Let us know your thoughts.

 
     
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