Supplier Development
Even after a painstaking selection process, a company was still struggling to find the right supplier. Supplier development, a process that can take several months or even years, was needed to transform a supplier into the reliable partner the company needed.
Supplier development can be used with both new and existing suppliers. However, "new" can mean that an existing supplier has not yet covered a certain product line or portfolio or that a previously unimportant supplier can be developed into a key partner. Or it could mean finding an entirely new supplier. Whatever the case, the focus is on the relationship with the supplier, and for this reason, the relevant term is “supplier development.” Only where there is high demand power can new suppliers be built up.
The process of developing and implementing meaningful strategies can be divided into four steps:
Identify categories where supplier development efforts are warranted
Profile and prioritize current or prospective relationships in terms of supplier development potential and the specific pool of candidate suppliers for consideration
Assess and create specific strategies for the candidate suppliers, applying a common framework to assess gaps, potential value from improvements, and readiness to collaborate. Key stakeholders drive this shared assessment and prioritization in joint workshops
Develop tools for strategy implementation. Focus on developing an implementation plan with the appropriate tools, including instruments such as a scorecard covering all key parameters from procurement volume to supplier dependability to competitiveness
Implement measures, and report on the results
Best practice strategies for recruiting and developing suppliers show how successful companies develop their suppliers. Resources need to be made available and dedicated to the development of suppliers and joint offerings to create a relationship that generates more value. Focus not only on the home region, but beyond—to think and develop globally. To ensure this happens, involve suppliers in the customer's business processes, pledged to the same goals and, if possible, certified. Communication needs to be open and should leave room for learning on both sides.
It should be apparent that some of these best practice strategies also lead to nearby squares on the chessboard. In any case, the key to supplier development is purposeful enhancement of the supplier-customer relationship to grow the supplier into an enterprise that makes an important contribution . In addition to developing new suppliers, the process may also involve cultivating existing suppliers and developing them to supply new products.
Supplier development may also be applied in the case of a low-price supplier that does not yet meet the procurement company's requirements, either in technical or quality terms. Any company that decides to undertake supplier development has to be prepared to put its money where its mouth is, but the company will harvest positive returns eventually. The financial commitment can take various forms, including investment, volume guarantees, exchange of know-how, and initial price premiums. Provided the collaboration is long term, any amount can be considered well spent.