Supplier Change Management  | Maximizing The Benefits Of Supplier Relationships

Supplier Change Management Services help organisations overcome the fear of moving suppliers. Often, clients view this as risky, time-consuming or difficult. Everyone remembers an experience where things haven’t gone as well as planned!  This means that many supplier relationships can roll on even where the service or prices are not up to scratch.

However, there can be many reasons for wanting to change suppliers. For example, some suppliers can become stale if they have been the supplier for an extended period, or sometimes there is a general breakdown in the relationship.

There is disruption in some industries by new participants who quickly bring new and innovative services to market. In contrast, established players are finding it challenging to implement change.

Why should you make the change?

1. Additional value or commercial benefit
2. Increased innovation or new services to benefit the customer

Potential disadvantages of change

1. The risks associated with changing a supplier (better the devil, you know?)
2. Any costs of existing an existing contract
3. The internal cost of changing suppliers both in terms of man-hours and any external support required to support the change (e.g. Legal)
4. Limited resources to execute the changes needed
5. Other organisation inertia means there is a limited appetite to change.

If the potential benefits of making the change outweigh the drawbacks, it is time for a change. It is essential to be honest, and detailed in this assessment. The Kahneman theory of “Loss Aversion” would suggest that most people inherently want double the benefit before being convinced to make a change.  This can lead to poor suppliers being retained even in circumstances that don’t justify continued supply.

Prepare for Change

Existing suppliers are an important consideration in the overall managing supplier change programme. Ensure you understand and factor the following into the change management process:

Implement the Plan

When approaching the procurement process to appoint a new supplier, you can follow the following routes:

1. Request for Information (RFI) – useful when the supply market is not as well known to the buyer or creates a long list of potential suppliers.
2. Request for Quote (RFQ), Request for Proposal (RFP) or Invitation to Tender (ITT) – a detailed quote or full commercial proposal.

In our experience, it is always best to engage the market before releasing any documents.  Suppliers can help inform on how to approach the market and the art of the possible.  However, be careful to get a balanced view that isn’t influenced by the competitive advantages of a particular supplier.  Let suppliers know the tender process is coming as they can then allocate the necessary internal resources to facilitate a quality response within the required timescales.

When drafting the RFP documentation, be clear on what you are trying to achieve. To find the best supplier to meet your needs, focus on what is essential rather than covering every potential requirement within the documentation.

Make sure the suppliers have enough time to craft a suitable response as they may be responding to multiple tenders simultaneously.

Key tips for running the procurement process

Objectives

Have clear objectives for the RFP and communicate these to the suppliers.

Specification

Create a concise and clear service or product specification focusing on what is important rather than covering all angles.  Separate the core service requirements from the ‘nice to haves’.

Transparency

Share with suppliers your organisation’s culture so the supplier can understand a little more about how you operate.

Open-Ended Questions

Ask questions that will allow you to differentiate between suppliers rather than closed yes or no answers.

Experience

Obtain references and case studies to support the response. References should be relevant to your type of business or fleet. For example, if you run a company car fleet, a reference regarding delivering a commercial vehicle fleet will be of limited value. Ask for contact details to verify the users experience rather than taking the marketing material for granted.

Process

Be clear about the ground rules such as:

1. 1. Who is in the project stakeholder group and their requirements or interests from the process?
   2. The timescales of the RFP, including deadlines.
   3. How the RFP will be scored both for pricing and quality elements.
   4. Any contracting principles which require inclusion and any red flags that are non-negotiable.
   5. Provide detailed feedback to those who are not successful at each stage of the process. Suitable suppliers will want to learn from the process, so feedback is essential.

Select a preferred bidder, then conduct final negotiations and contract discussions.  Performance measures such as service level agreements (SLA’s) and key performance indicators (KPI’s) should form part of the contract discussions. These performance measures should focus on what is essential and remove those with no real value. Unfortunately, some standards are set as they are easy to measure rather than them being important.

Document the escalation route to address performance failures within the contract. Where measures are critical, they should have suitable performance penalties attached.

If the supplier cannot fulfil the contract to your satisfaction, you should always reserve the right to walk away.

Implementation

Following the conclusion of the contract, you can begin the transition to the new supplier.  Stakeholders must be available to support the change effectively.  You, as the customer, should also take overall responsibility for the transition and not be led by the supplier.  This way, you can keep control over the process and not be dictated to by the supplier.

Maintain control over the process, reduce risk and ensure timescales and deliverables are followed.

Once the implementation has taken place, it is always helpful to run a ‘lessons learned’ session to harvest any information which will be useful when running similar types of exercises in the future.

Supplier Management

After successfully implementing the new supplier, it is vital to manage the new supplier to realise the value from making the change. Identify key stakeholders to form the supplier management panel. An effective supplier relationship management process will incorporate the following elements:

Can we help?

At EVP we have extensive experience of managing supplier change, procurement processes and implementing change.