Leading IT Transformation – Workshop 12 (Vendor Evaluation)
The Appleton Greene Corporate Training Program (CTP) for Leading IT Transformation is provided by Ms. Drabenstadt MBA BBA Certified Learning Provider (CLP). Program Specifications: Monthly cost USD$2,500.00; Monthly Workshops 6 hours; Monthly Support 4 hours; Program Duration 24 months; Program orders subject to ongoing availability.
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Learning Provider Profile
Ms. Drabenstadt is a Certified Learning Provider (CLP) at Appleton Greene and she has experience in Information Technology, Information Governance, Compliance and Audit. She has achieved an MBA, and BBA. She has industry experience within the following sectors: Technology; Insurance and Financial Services. She has had commercial experience within the following countries: United States of America, Canada, Australia, India, Trinidad, and Jamaica. Her program will initially be available in the following cities: Madison WI; Minneapolis MN; Chicago IL; Atlanta GA and Denver CO. Her personal achievements include: Developed Trusted IT-Business Relationship; Delivered Increased Business Value/Time; Decreased IT Costs; Re-tooled IT Staff; Increased IT Employee Morale. Her service skills incorporate: IT transformation leadership; process improvement; change management; program management and information governance.
MOST Analysis
Mission Statement
Vendor evaluation is one aspect of the sourcing strategy itself. Vendor evaluation is done to ensure that a good portfolio of suppliers is available for use in the transformation program. Vendor evaluation can also be applied to current suppliers in order to monitor and measure their performance. It is essential for decreasing costs, minimizing risk as well as for the continuous improvement of the process. Vendor audits must be undertaken from time to time in an organization as there is always a need for quality control in the technology market. Vendors are required to deliver the same quality of products and services as agreed in the contract. Continuous vendor evaluations ensure that they comply with these quality standards. Particularly in the case of a new project or a new procurement, vendor evaluation is absolutely essential. It helps in determining whether a prospective vendor will be able to meet the organizational standards and the specific requirements of the digital transformation project undertaken. The goal is to choose a low-risk vendor that offers the best-in-class products or services. There are many important factors to consider when choosing a vendor for a particular project. Apart from the quality of product or service, there may also be legal risks involved such as regulatory compliance requirements or cybersecurity risks. Proper vendor assessment help in mitigating these and similar risks reducing the liabilities on the organization. Vendor evaluation can be done on many different criteria. If the vendor evaluation is being done for a new product, competitive selection can be done by comparing the features and services offered by different vendors and choosing the one that best suits the project requirements. Vendor evaluation can also be done by separately scoring individual vendors on different factors, such as price, features, reliability in delivery, and so on, and then comparing the scores to choose the highest scoring vendor.
Objectives
01. Collect Vendor Data: departmental SWOT analysis; strategy research & development. Time Allocated: 1 Month
02. Price & Cost Analysis: departmental SWOT analysis; strategy research & development. Time Allocated: 1 Month
03. Managing Vendor Risk: departmental SWOT analysis; strategy research & development. Time Allocated: 1 Month
04. Vendor Communication: departmental SWOT analysis; strategy research & development. Time Allocated: 1 Month
05. Vendor Relationship: departmental SWOT analysis; strategy research & development. Time Allocated: 1 Month
06. Vendor Culture: departmental SWOT analysis; strategy research & development. Time Allocated: 1 Month
07. Vendor Stability: departmental SWOT analysis; strategy research & development. 1 Month
08. Vendor Viability: departmental SWOT analysis; strategy research & development. Time Allocated: 1 Month
09. Vendor Quality: departmental SWOT analysis; strategy research & development. Time Allocated: 1 Month
10. Vendor Performance: departmental SWOT analysis; strategy research & development. Time Allocated: 1 Month
11. Classify Multiple Vendors: departmental SWOT analysis; strategy research & development. Time Allocated: 1 Month
12. Vendor Audit: departmental SWOT analysis; strategy research & development. Time Allocated: 1 Month
Strategies
01. Collect Vendor Data: Each individual department head to undertake departmental SWOT analysis; strategy research & development.
02. Price & Cost Analysis: Each individual department head to undertake departmental SWOT analysis; strategy research & development.
03. Managing Vendor Risk: Each individual department head to undertake departmental SWOT analysis; strategy research & development.
04. Vendor Communication: Each individual department head to undertake departmental SWOT analysis; strategy research & development.
05. Vendor Relationship: Each individual department head to undertake departmental SWOT analysis; strategy research & development.
06. Vendor Culture: Each individual department head to undertake departmental SWOT analysis; strategy research & development.
07. Vendor Stability: Each individual department head to undertake departmental SWOT analysis; strategy research & development.
08. Vendor Viability: Each individual department head to undertake departmental SWOT analysis; strategy research & development.
09. Vendor Quality: Each individual department head to undertake departmental SWOT analysis; strategy research & development.
10. Vendor Performance: Each individual department head to undertake departmental SWOT analysis; strategy research & development.
11. Classify Multiple Vendors: Each individual department head to undertake departmental SWOT analysis; strategy research & development.
12. Vendor Audit: Each individual department head to undertake departmental SWOT analysis; strategy research & development.
Tasks
01. Create a task on your calendar, to be completed within the next month, to analyze Collect Vendor Data.
02. Create a task on your calendar, to be completed within the next month, to analyze Price & Cost Analysis.
03. Create a task on your calendar, to be completed within the next month, to analyze Managing Vendor Risk.
04. Create a task on your calendar, to be completed within the next month, to analyze Vendor Communication.
05. Create a task on your calendar, to be completed within the next month, to analyze Vendor Relationship.
06. Create a task on your calendar, to be completed within the next month, to analyze Vendor Culture.
07. Create a task on your calendar, to be completed within the next month, to analyze Vendor Stability.
08. Create a task on your calendar, to be completed within the next month, to analyze Vendor Viability.
09. Create a task on your calendar, to be completed within the next month, to analyze Vendor Quality.
10. Create a task on your calendar, to be completed within the next month, to analyze Vendor Performance.
11. Create a task on your calendar, to be completed within the next month, to analyze Classify Multiple Vendors.
12. Create a task on your calendar, to be completed within the next month, to analyze Vendor Audit.
Introduction
Vendor Evaluation: The What, How, and Why
Organizations perform vendor assessments to screen potential suppliers and assess their interactions with current ones. One of the most crucial choices a business must make to be competitive is how to evaluate its vendors, especially in these times of rapid market change.
Putting a Vendor Evaluation System in Place
Vendor performance evaluation should not only be a process used for assessing new vendors; it should also be a regular component of your company’s procurement activity. Using categories and rankings within those categories, a good supplier assessment system will frequently review suppliers to identify strong and weak supply areas. Evaluations assist in identifying which suppliers should be given priority as well as in identifying potential danger areas, even for businesses with a restricted number of suppliers they can use. The system’s ultimate objective is to monitor vendor performance consistency in a way that is integrated into the purchasing process.
Clear KPIs and measurements aimed at company priorities, as well as red flag measures to highlight when a supplier doesn’t meet criteria, should be included in vendor evaluation. Every time a supplier is used, the procurer should rate them, and there should be a deadline for when they should submit their ratings. The individual or group classifying vendors should also routinely check the input. When procurers evaluate supplier performance, adopting a numerical assessment system may be simpler because companies may be quickly ranked using the final results.
These rankings and metrics ought to be external as well. It’s critical to come to an understanding on them with your vendors so that they are aware of them and can offer input. Clarifying expectations for them and motivating improvements can both be accomplished by incorporating a system of recognition and reward for progress. Using agreed-upon KPIs and measurements inconsistently, failing to provide suppliers with regular feedback on their performance, neglecting supplier input when discussing and choosing measures, and conflating metrics and KPIs are all common faults in vendor assessment systems.
What is Supplier Evaluation?
Supplier evaluation in procurement refers to a formal review of suppliers to analyze their performance in relation to various criteria and determine whether they satisfy organizational needs. The goal is to build a portfolio of useable suppliers that is best-in-class and low-risk.
A pre-qualification step in the purchase process, supplier evaluation is a constant process for procurement departments.
According to Hald and Ellegaard (2011), supplier evaluation is “the process of quantifying the efficiency and effectiveness of supplier action.”
So, to put it simply, evaluating a supplier is determining whether or not they are a suitable fit for your company. In addition, it evaluates the performance of your present supplier base to identify areas for cost-cutting, risk-reduction, and ongoing improvement. A transparent and equitable alignment of objectives, data, and analysis with suppliers is the first step in an efficient supplier assessment process.
The Importance of Vendor Evaluation
Utilizing few resources as effectively as possible is the aim of every procurement organization. To secure the best contracts in terms of quality, pricing, flexibility, and reliability, it is therefore vital to evaluate suppliers.
Although the supplier evaluation process can be difficult, the rewards of locating low-risk suppliers of high-quality products and services as well as mutually beneficial, long-term business relationships outweigh the challenges.
Some of the other benefits of supplier evaluation include:
• Risk mitigation: You may reduce the legal, contractual, and security risks connected to using technology outside of your business by properly vetting vendors.
• Enhanced supplier performance: The effectiveness of the procurement process as a whole is directly correlated with improved supplier performance. The supplier evaluation and appraisal criteria account for 57.1% of the performance of the procurement process (Murigi 2014). This is so that suppliers are encouraged to continually enhance their operations by increasing productivity and being more creative. However, when businesses base their decisions on supplier performance goals, they observe amazing results.
• Cost reduction: Any firm should consider supplier evaluation because it has a direct impact on the price and quality of purchased goods. Additionally, a small increase in price and quality brought on by supplier choice has important advantages for businesses.
• Leveraged supply base: Evaluation of supplier performance aids in standardization, which produces better outcomes for enterprises. It also enables businesses to plan their objectives and courses of action in accordance with the capacities and performance levels of their suppliers.
A quality criterion is a useful tool for evaluating suppliers since it encourages them to continuously enhance their processes by increasing productivity and becoming more creative. The performance of a purchasing organization’s suppliers is crucial to its success. It’s crucial that both the supplier and the customer agree on what constitutes satisfactory quality.
• Strengthened supplier relationships: Effective supplier management promotes loyalty, cooperation, and communication, which provides the groundwork for long-lasting, mutually beneficial working relationships.
• Improved business outcomes: By working with reputable suppliers, you’ll be able to offer products and services that are of higher quality and more affordably priced. As a result, you will be able to better service your clients and increase both sales and client loyalty.
Supplier Evaluation Process
The first step in the supplier evaluation process is to assess your business’ demands and create a list of specifications so that the appropriate vendors may be contacted or discussed. The suppliers are then evaluated using a selection criterion, which includes selecting how to assign a score to each source based on these factors.
A market analysis is done to determine a predetermined number of suppliers who will take part in the request for a quotation, or RFQ, procedure before possible suppliers are evaluated. Making an initial list of bids after gathering a small number of suppliers is an alternative to the second phase. The suppliers on this list all meet the criteria. The suppliers on the list are then given a request for information (RFI) to learn more about them. The purpose of the RFI is to see whether the company is interested and to gather enough data to make a preliminary assessment.
All of the company’s stakeholders are involved in the evaluation of the suppliers when the bids or RFIs are received. Companies are ultimately chosen as suppliers depending on the outcomes and negotiations.
The majority of procurement specialists will concur that there is no one optimal method for evaluating providers. Companies employ a variety of strategies to determine what is effective and what is not. Regardless of strategy, the evaluation process’s ultimate objective is to minimize risks and increase total value for the procurement organization.
It’s vital to note that supplier selection does not eliminate the requirement for supplier evaluation. In reality, it is imperative to monitor the supplier’s progress after an association is created. Companies can identify which suppliers are performing the best and where there is room for development by ranking them according to various indicators.
Supplier Evaluation Criteria
A multi-criteria problem, supplier assessment incorporates both qualitative and quantitative elements. Because of this, creating general selection criteria and using them in any circumstance is insufficient.
Having said that, the criteria for evaluating suppliers should be in line with the goals, mission, and vision of your organization. It should also take into account aspects like corporate social responsibility, communication, and cultural commitments in addition to aspects like quality, cost, and financial integrity.
Reviewing the standards that are most important to your business is another step in the evaluation of vendors and suppliers. Data security, for instance, is of highest importance to a healthcare organization, and they must also take into account many compliance rules; as a result, these criteria take precedence over other considerations.
However, businesses frequently face contradictory tangible and intangible elements where it is challenging to decide.
For this reason, the supplier selection process must engage all pertinent company stakeholders, including procurement, engineering, logistics, production, etc. The stakeholders must agree on the selection criteria. By doing this, it is ensured that each is given the appropriate amount of weight based on their relative relevance, corporate priorities, and strategy.
12 Criteria to Evaluate Suppliers
The performance of an organization’s procurement department is correlated with its capacity to develop proper supplier evaluation criteria.
Murigi (2014) estimated that the supplier evaluation and appraisal criteria account for 57.1% of the performance of the procurement process.
The most frequently utilized criteria are typically those that relate to the delivery of materials, quality, pricing, financial situation, communication, and technology. However, depending on the method, there may be numerous additional factors that are more crucial than those described above. As a result, compiling a single, exclusive list is difficult.
Here are a few of the different factors that a company could consider when assessing potential suppliers:
1. Quality: Quality is a difficult notion to describe. The description supplied by IBM is the one that best describes the supplier evaluation process: “The extent to which customer requirements are met determines quality.
When both the provider and the client agree on standards and these requirements are accomplished, we talk about a quality product or service.” Thorough departmental, supplier, and customer consultation is necessary for quality management. Following the determination of the necessary quality levels, the entire manufacturing process must be set up to ensure that the quality level is attained and maintained in a manageable manner.
To do this, quality management relies on four interrelated processes: standard-setting, assessment, control, and assurance. The extent to which the procedures are followed to satisfy the requirements listed in national and international standards is determined by an external assessment. The ISO-9000/9001 standards are one illustration of such a standard.
2. Price/Cost: Here, the expectations relate to overall cost rather than material unit pricing, as well as present and future cost requirements, cost reduction, and ongoing development (including any acquisition, inventory, or disposal costs).
3. Performance Delivery: the assurance that the proper product will be delivered in the proper quantity and at the proper time. It entails assessing the procedures for accepting client orders, planning the production of the goods or services required to meet those orders, and then estimating the time necessary to deliver the goods or services in accordance with the client’s expectations.
4. Service: It takes into account aspects like responding quickly, resolving complaints, and following directions. It is quite challenging to develop service criteria because of all these variables.
A supplier’s service is typically evaluated using subjective evaluations. To do this, feedback must be gathered regarding the level of assistance, supplier attitude, speed of assistance requests, support staff qualifications, etc.
For rating supplier service performance, the majority of businesses use a pretty straightforward scale with descriptions, such as excellent, acceptable, and poor.
5. Financial Strength: It entails assessing the financial standing of a potential provider. In plain English, it refers to determining if a supplier can make resource investments, pay its vendors and employees, and continue to fulfill its debt and financial responsibilities. These elements are crucial in figuring out whether the supply will be interrupted or not.
6. Lead-Time: This is a reliability issue and means the elapsed time from the order being placed to delivery.
7. Technical Ability: This criterion determines how technically advanced a supplier is and whether they will be able to follow the development based on that ability.
8. Flexibility: It’s an adaptability criterion that defines the ability of a supplier to adjust volumes and delivery times as per the client’s needs.
9. Development: It takes into account factors like innovation and improvement that are needed to improve products and reduce costs.
10. Management Approach: This factor is especially crucial for a business wanting to establish lasting connections with its suppliers. These connections are typically made with vendors who supply crucial commodities in large quantities, or those in the critical quadrant. The parties involved must talk about and agree upon their goals and KPIs in order to lay the groundwork for such a relationship. If these connections are made properly, they can open the door to cooperative efforts to develop new products and cut costs.
11. Geographic Location: The proximity criterion is crucial since greater distances can occasionally result in other transportation-, logistics-, and currency-related variations that limit flexibility.
12. Environmental Regulation Compliance: This criterion, which takes into account a supplier’s capacity to adhere to sustainability standards, is quickly turning into a prerequisite for supply chain alliances.
Identifying the Key Supplier Evaluation Criteria
It was recommended that businesses group their selection criteria into the following categories:
Mandatory – As the name implies, a supplier must meet certain requirements in order to be included on the bid list.
Preferred – A provider may still submit a proposal even if they are unable to achieve these requirements. However, the selection of suppliers will be based on these factors.
Leading – Attempt to keep these to a minimum. These problems will actually distinguish providers and set the great ones apart from the average ones. The supplier selection procedure should place the most emphasis on these considerations.
5 Tips for Successful Supplier Evaluation
1. To properly carry out their duties, procurement managers must develop scoring criteria that will guide them in evaluating and selecting the suppliers they should work with and keeping them on the list of authorized vendors.
The provider might be chosen based on a variety of factors. These standards, however, occasionally conflict. For instance, pricing and quality frequently do not coincide. As a result, it becomes vital to assign weights to the criteria in order to identify which supplier can offer the best trade-off among all the chosen criteria. It is recommended to select fewer critical criteria rather than a lengthy list, as each will have less of an impact on the final score individually.
2. Certain factors are difficult to evaluate since they can only be qualitatively measured (and not quantitative). These standards are more individualized and subjective. For instance, whereas the cost may be quantified, the quality of the good or service is a qualitative criterion. Direct measurements are impossible. The cost of returning the product, the cost of the services provided after the sale, and other factors should be considered in that situation.
3. For businesses, managing tens of thousands of suppliers across numerous departments is a major burden. By building and maintaining a central database of all the suppliers, it can be successfully overcome. Here, a supplier management tool like Ignite Procurement can help you centralize and auto-populate your supplier data.
4. Choose the person who will be in charge of the evaluation. Usually, a member of the procurement team performs this position, although hiring an analyst for complicated or expensive cases is a good idea. As an alternative, a consultant can assist with some of the laborious parts of the process, such as research, creating the request for proposal (RFP), and doing a financial analysis—some of which may not be available within the company.
5. Setting a deadline is also essential; without one, it may be challenging to complete the hiring and selection processes.
A Quick Supplier Evaluation Checklist
A continual process of supplier evaluation makes sure that your customers and interests remain at the forefront. The steps listed below can be checked off as you proceed through the procedure to make sure you evaluate your suppliers using best practices:
• Conduct regular evaluations of your supplier’s performance.
• Establish supplier evaluation criteria as well as standards, processes, and procedures around it.
• Create a supplier assessment form to standardize your evaluation and make your decisions better, faster, and more strategic.
• Select and classify your suppliers based on your supplier assessment goals.
• Make use of your data and bring facts to your supplier discussions. Also, keep the communication going at all times, especially with your strategic suppliers.
• Use technology to make the best use of the information you have.
• Organize regular conversations with your suppliers to plan and improve on sub-optimal areas.
• Re-evaluate supplier performance based on your established criteria.
• Repeat the process.
Executive Summary
Chapter 1: Collect Supplier Data
What is vendor data? Vendor data is any information related to a specific vendor and or vendor process, from researching and sourcing, to onboarding and payment. All information on the vendors your company has onboarded and used is considered vendor data. This includes vendor contracts, contact details and location, purchasing terms, and legal documentation. It comprises gathering all of the details about a vendor that are needed to onboard them, do business with them, and measure performance and related spending.
But usually, vendor data management goes beyond the surface level: at first glance, these look like a list of trivial details…but all it takes is one misspelling, or one incorrect number, location or other seemingly inconspicuous oversight to create a big delay, and that vendor won’t be paid anytime soon, and anyone relying on that work might experience a slowdown.
Ongoing business operations require access to information on vendors for all manner of processes: For example finance managers – the people actually releasing the money to vendors – need to ensure everything is as it should be; other stakeholders have a part to play involving compliance, procurement and analyzing vendor performance. And if there’s even one hitch or incorrect detail during these processes, things can go very wrong.
Amazingly, it really doesn’t need to be that way. Vendor data management solutions should help you automate the entire process, collecting related data to provide you with data-driven reports and dashboards.
It’s time you made the move, and start reaping the rewards for managing your data correctly.
The Benefits of Better Vendor Data Management
Your company’s business decisions should be based on your vendor data’s insights, allowing you to make high-level decisions from an effective, automated vendor data management system.
With correctly managed vendor data, you’ll be able to gain visibility and insight into how much your business is spending across suppliers, contracts and timeframes…all of which can help you make further important (and data-driven) business decisions in the future.
You’ll save time, effort and budget by collecting and maintaining a centralized vendor database, reducing manual, repetitive work – as well as invaluable working time.
Team members will move away from a siloed mentality, and be able to easily access more up to date, workable information; vendor relationships and compliance will be far more easily manageable, thanks to higher-level, data-driven decisions.
Chapter 2: Price & Cost Analysis
When businesses can find cost-effective suppliers to meet all of their inventory needs, they can begin creating long-term partnerships to benefit both parties.
Vendor analysis is a criterion in which a company judges a supplier based on their overall production value and efficiency. Businesses can also utilize a cost analysis that provides data on an item’s total cost to determine if its manufacturer price is sensible.
By using these elements as a gauge, businesses can choose new suppliers or consolidate their existing vendors to prioritize those providing the best overall service. Running this analysis periodically ensures that the supplier is still meeting the company’s product fulfillment needs.
Data collected from the vendor cost analysis allows management to determine which manufacturers offer the best product services and costs that promote their bottom line.
Cost Analysis vs. Price Analysis
While often used interchangeably, cost and price analyses are two very different processes.
Price Analysis
The price analysis is the less complicated strategy of the two, solely focusing on the market prices of similar products. The main goal of this method is to determine whether a vendor’s set price for an item is reasonable.
Price analysis for an item can be conducted quite easily by-
• Researching e-commerce sites to find an average online retail price.
• Contacting multiple manufacturers to discuss how they set their prices.
• Asking competitors within the market what they normally pay for a product.
Taking these simple measures can help a company decide whether they should begin a business venture with a supplier or find a seller with better prices.
Cost Analysis
On the other hand, cost analysis considers a good’s overall value through direct and indirect costs. This strategy is more complex as it seeks to break down the value into a comprehensive format. Companies perform cost analyses when manufacturers are unable to provide a direct item cost or are producing a unique product that is not yet offered on the market.
To conduct a cost analysis, businesses must first examine the direct costs of an item, such as:
• Labor wages
• Materials
• Fringe benefits
• Travel
All of these elements are expenses necessary to produce and sell a product, directly affecting its profit margin.
Then, the company must consider the indirect costs, including:
• Advertising/Marketing
• Legal fees
• Repairs
• External labor wages
• Communication
• Insurance
• Taxes
• Depreciation
• Overhead costs
By combining all of the inventory costs associated with an item, businesses can determine if a good’s price tag is reasonable based on its related expenses.
Chapter 3: Managing Vendor Risk
Strategic alliances with IT vendors aid businesses in achieving their goals at a lower cost. However, there is a lot of pressure on businesses to make sure that their vendors maintain continuous compliance with internal rules and numerous growing regulations due to the complexity of vendor networks, increased customer expectations, and a rapidly changing regulatory environment.
The outsourcing of compliance responsibilities is not a part of outsourcing company operations to a vendor. In order to comprehend vendor relationships, reduce vendor risks, avoid compliance fines, damages, and expensive investigations, it is the responsibility of corporations to do rigorous vendor due diligence and monitoring.
Businesses that rely significantly on vendors but don’t have enough visibility into their vendor networks run a high risk of being exposed. For organizations to remain sustainable and to comply with regulations, it is crucial to recognize and manage vendor risks. Strong vendor risk management (VRM) programs assist businesses in preventing inherent risks rather than just responding to unfavorable circumstances and accidents after they happen.
The majority of VRM projects are conventional at many organizations. Only when choosing a vendor or signing a vendor contract is the focus on minimizing vendor risk. Continuous vendor monitoring, which enables businesses to be well-prepared for unforeseen events, is necessary for VRM to be genuinely effective. Having said that, it might be difficult to create and implement an effective VRM program since many different aspects must be taken into account, such as the extent of the vendor connection, dependence on the vendor, the vendor’s location, and financial stability. Technology can assist here by greatly automating and streamlining vendor risk evaluations.
The Importance of a Vendor Risk Assessment
Many businesses are trying to cut the fat and concentrate on their core competencies in light of the present economic scenario. Businesses are outsourcing crucial tasks, from manufacturing to accountancy, to outside contractors or suppliers in order to realign their priorities. This method is efficient since it may essentially save costs, improve performance, free up important resources like time, and streamline how a business operates.
However, while this method may eliminate some laborious or time-consuming tasks and allow the company to focus on what it does best, it also exposes businesses to a number of hazards due to the conduct of these third-party contractors. This is particularly true for large organizations that work with numerous vendors or suppliers.
Larger businesses are by nature more complicated, and keeping track of numerous vendor and supplier relationships increases the volatility that needs to be monitored. It can be challenging to pinpoint possible hazards since various departments may use a number of channels to communicate with vendors. There is frequently minimal accountability for the management of these partnerships and the associated risks.
Chapter 4: Vendor Communication
Despite being essential to the success of the supply chain, communication is unexpectedly one of the areas that needs the most work once the evaluation process has started.
Many procurement specialists agree it is particularly challenging to work with personnel from other departments. Additionally, communication might become much more difficult when it comes to talking to people outside the company, such as suppliers.
The Importance Of effectively Communicating with vendors
It all comes down to the reality that better processes can be achieved by bringing in more innovative ideas through effective communication between stakeholders and external providers. It makes sense that a process will be much better managed if people from different stages of the process are able to offer recommendations for improvements based on actual knowledge. The procurement department’s ability to affect the entire purchase process is reduced if communication is.
Steps To Improving Communications For Supply Chain Success
There are certain things that procurement experts need to think about if we’re going to address this communication problem in supply chains:
• Prioritise stakeholders/suppliers. Evaluate the value of your stakeholders to the organization as well as their level of support. Suppliers, take into account the effect a supply interruption might have on your company and how strategically minded they are.
• Regularly meet with stakeholders and suppliers. You can identify and address their problems and worries as they arise by meeting with them frequently (every week, for example). Don’t be afraid to keep them updated frequently, even if it’s just with a brief summary email. It’s crucial to frequently evaluate how your relationships with suppliers may be made better on both ends, and to both give and receive constructive criticism from them.
• Always offer options. Create a list of possibilities and the supporting evidence for each after negotiations. By providing the stakeholders some power and avoiding taking control away from them, you can give them a sense of prestige.
Use The Right Communication Tool
When it comes to the actual communication strategy, you should evaluate which approach best fits the circumstances and will produce the best outcomes for supply chain performance. In addition, the following fundamental guidelines should be taken into account while communicating with stakeholders and suppliers:
• Be clear. This may seem like a simple, obvious notion, but it’s crucial to make sure the proposal’s “story” is communicated so that stakeholders are aware of and enthusiastic about what you are suggesting. Focus on the advantages the project will bring about as well as how they will be realized in a succinct headline that sums up the proposal.
• Tailor it. Don’t merely concentrate on general costs and benefits while communicating the project’s main advantages. Take into account the stakeholders you are addressing and modify it to demonstrate how you will answer each of their specific problems.
• Be personal and pragmatic. With stakeholders, it’s frequently more advantageous to call them or pay them a quick visit rather than send less direct communication, such emails. When attempting to implement change, a personable and practical approach will produce faster and better results.
It is crucial to communicate with both internal and external stakeholders and suppliers. It is feasible to improve communication and guarantee the success of the supply chain by taking the appropriate actions and making the necessary adjustments.
Chapter 5: Vendor Relationship
It is essential to effectively manage vendor/supplier relationships during any IT vendor evaluation process. It’s critical to build positive connections with your company’s main IT providers to ensure dependable supply, uncover competitive pricing, and comprehend new trends that could have an impact on your operation. Even while many companies have adopted a supplier relationship management strategy in recent years, many still lack the knowledge and expertise to fully utilize the collaboration and goodwill of their suppliers.
Understanding Supplier Relationship Management
Understanding what supplier relationship management really entails can help you build thoughtful partnerships with suppliers rather than haphazard ones. In order to maximize a supplier’s value to the business, supplier relationship management generally entails taking a strategic approach to planning and managing a business’ contacts with a supplier. Finding chances for collaboration with important suppliers to add value and reduce the risk of supply chain failure, which could have detrimental effects on your company, is frequently a part of this process.
Invest in Appropriate Software
Although there are specialized software programs for managing supplier relationships, smaller organizations might not need these. However, think about spending money on supply chain or inventory management software that includes a supplier relationship management feature. It is likely to be far easier to use specialized supplier relationship management systems than to create unique tools or processes to track supplier commitments and monitor supplier performance. This is especially true for firms that are expanding; when you work with more suppliers, it gets more difficult to manually track each one.
Walk the Talk with vendors
In an ideal world, both supplier and customer relationships would be managed by you. A capable provider should be acting similarly. Two crucial ways that wholesale clients can show suppliers they are good clients are by communicating effectively and paying your invoice on time. Suppliers frequently have to balance a variety of conflicting consumer needs. Giving your suppliers as much advance time as you can reduces the amount of stress on their business. Since your suppliers depend on payments to maintain a healthy cash flow, just like your company, they frequently struggle with non-payment or late payment. Creating a really collaborative supplier relationship is extremely impossible if your suppliers frequently have to take time away from their busy schedules to pursue outstanding bills.
Partner with Fewer Suppliers
Working with many suppliers has a number of benefits, including reducing risk, boosting capacity, and expanding exposure to a wider range of goods. Managing connections with too many suppliers, though, can deplete your company’s important resources and energy. While adding more suppliers initially improves reliability and value, eventually the added expenses associated with administration and relationship management outweigh the benefits.
Agree on Performance Measures
For supplier relationship management to be successful, performance requirements must be made explicit. Although creating performance standards may require some debate, it is crucial to have them in place so that all sides can agree on an impartial standard. Any performance requirements should be precise and quantifiable to make it simple to evaluate supplier performance.
The B2B version of customer relationship management is frequently used to describe supplier relationship management. We’ll define this key management idea and outline how supplier relationship management may be implemented and enhanced to maximize corporate performance.
Chapter 6: Vendor Culture
Along with their effectiveness, capacity, quality, and pricing, suppliers should also be evaluated for their ability to collaborate with you. It is a crucial step in evaluating suppliers, especially when picking an appropriate IT vendor.
But what exactly do we mean when we talk about “culture,” and why is it so important when there is only work to be done?
Since culture is centered on a company’s attitudes and beliefs, a good cultural fit between you and the agency of your choice will have a number of advantages. These advantages will include the agency going above and beyond to satisfy you as their client, even if they’ve been let down elsewhere in the process by a longer supply chain; their responsiveness when you or your own clients change your mind and adjustments need to be made right away; their comprehension of your business, your product, and how that needs to be captured on screen; and their attitude toward listening to your exact requirements in order to create a superior final product.
Unsurprisingly, a bad cultural match might have the opposite impact, which can increase the cost to your company. This is why it’s crucial that you choose your IT software agency carefully and make sure you’re working with the best possible provider.
When looking for suitable IT vendors, it might be wise to enquire about their company values (if they are not already listed on their website), their best clients and why, whether they would like to have you as a client, and whether they have any prior experience working with clients with different cultural backgrounds.
Since teams function best when they mirror one another, it makes sense that when you choose a supplier, you should treat them as though they were a member of your own team. It doesn’t matter if departmental cultures differ significantly from one another; the overall culture should be the same to produce better work and/or goods.
After all, culture is what characterizes a group of people for who they have been and who they are today. Your company’s structure is shaped by your business suppliers in all of their roles, therefore harmony and balance are essential.
Firms cannot function without suppliers, and all businesses depend on them in some way. The message is the same whether it’s a three-month IT project or a three-year contract to create and update your custom website: a good cultural fit can only ever result in rewarding, effective, and productive business relationships. Often, the foundations for good supplier relationships have been established even before a contract has been signed.
Chapter 7: Vendor Stability
We are all aware of how important financial stability is to the survival of your company. You most likely keep a close check on the revenue, profitability, and cash flow of your business. Are you paying enough attention to the stability of your vendors given how crucial funds are to your business? The following three points will explain why you should routinely assess your vendors’ financial standing.
1. It signals longevity. Losing a vendor or supply can be disastrous. Even if you have redundancies in place, a major supplier going out of business can have an impact on your entire supply chain. A company’s financial performance is a leading predictor of whether its business operations will continue or end. Finding this information is also not difficult. Utilizing the Financial Stress Scores (FSS), Supplier Evaluation Risk (SER), and Viability Rating, Dun & Bradstreet constantly assesses and rates businesses.
2. It indicates business alignment. Maintaining the success of your business is one of your primary priorities. You want suppliers who are equally committed to that objective and who make it as simple as possible to conduct business successfully and maintain client satisfaction. If your suppliers are committed to the success and expansion of their own business, this is also a sign that they will care just as much about your success.
3. And last, but definitely not least, it impacts your bottom line. Financial stability gives your suppliers several opportunities. They can more quickly obtain new tools and technology and can better bargain for supply rates and exclusive material deals. Higher quality and more efficient production are frequently the results of new equipment. Your bottom line improves for the better virtually always when those factors come together.
Chapter 8: Vendor Viability
It’s safe to conclude that the majority of organizations can only function and accomplish their goals by relying on a wide array of goods and services from outside sources.
Naturally, some of those goods and services will be more important to the company’s success than others.
Nobody likes to arrive at work one day to discover that operations have been disrupted due to a crucial supplier’s inability to provide, or worse, their inability to deliver moving forward.
Forewarned is forearmed. It is so much better to be warned that something horrible might happen before it actually does than to learn about it after the fact.
While “something bad” might refer to a variety of scenarios ranging from the improbable to a foregone conclusion, this course manual will concentrate on issues that might compromise a crucial supplier’s viability or ability to endure.
Assessing supplier viability is a significant risk-reduction strategy. Its goal is to assess the possibility that a crucial supplier won’t be able to fulfill its contractual obligations for accurate and timely supply as well as warranty fulfillment.
We will go over the following topics in this course manual:
1. The dimensions of supplier viability
2. The importance of supplier viability
3. Situations that can affect supplier viability
4. Supplier viability warning signs
5. When to assess supplier viability
6. How to assess supplier viability
7. Guidance for financial viability assessments
8. Considerations for mitigating supplier viability risk
What Is a Supplier Capability Assessment?
An official process that assesses a potential or present supplier’s actual manufacturing capabilities for a specific product or over the course of a contract is known as a supplier capacity assessment.
You may use lean thinking to improve the procurement process by using these checks. They make it possible to approach quality in a source-specific manner. You might identify weak points and come to the conclusion that a specific organization impedes your development toward milestones. However, these evaluations also make it possible to collaborate with suppliers to find solutions to issues before they go out of control.
How Does Your Supplier Relationship Affect These Audits?
Supply chain professionals should be aware that the specifics between the parties involved will influence their reasons for organizing in-person examinations. For instance, people visit the sites of potential suppliers to learn more about them and to talk about their company goals. In-person visits give a sense of urgency when evaluating a supplier with known performance concerns.
Whatever your particular justifications may be for visiting suppliers, keep in mind that productive partnerships depend on such trips. It is simple to communicate via emails, pictures, and video chats, but these tools do not replace the requirement to physically visit a supplier’s premises and see its operations.
Which Benefits Can You Expect From Regular and Ongoing Assessments?
Supplier capability evaluations demand time and monetary commitments. However, they provide you with a number of benefits. These consist of:
• recognizing issues before they have an impact on your supply chain
• Choosing more wisely when it comes to purchasing
• assisting suppliers in waste reduction
• having greater assurance regarding contract renewals
• demonstrating to partners your desire to see them succeed
• putting in place metrics that show your expectations
• confirming that suppliers adhere to regulatory requirements
• Getting guarantees from businesses that they can meet your current needs
Assessing your suppliers throughout the whole partnership fosters trust amongst all parties involved. Suppliers will likely experience worry if they are unsure if they can meet your needs successfully, which could lead them to act resentfully towards your business.
How Should You Begin Performing These Supplier Checks?
There are specialized businesses that can assist you in formally evaluating your supply partners. Representatives from those companies are knowledgeable about best practices for various industries, and they arrange on-site visits to suppliers’ facilities to gain a thorough understanding of how things operate there.
You’ll receive a capacity assessment report with recommendations on how to use the audit’s information. It also lists the dangers and gaps that have been found, along with the most effective strategies to solve issues. With those specifics, you may create a strategy for determining how weaknesses influence your business and how you might assist a supplier in resolving them.
Chapter 9: Supplier Quality
Supplier Quality Assurance (SQA) is a procedure designed to make sure that a vendor or supplier consistently provides products or services that meet the expectations of the client. In order to ensure that the supplier’s offers satisfy the established specifications with the least amount of inspection or modification, this process is collaborative.
Process and IT service audits that handle external and internal checks and concentrate on supplier management, product quality compliance throughout its lifecycle, manufacturing and equipment quality, and effectiveness should be a part of any effective quality assurance program. We’ll examine the complete SQA process in-depth in this course manual and go through the major factors that affect its efficiency.
The 9-Step SQA Process and How It’s Measured
The supplier quality assurance process, according to Joseph Moses Juran, a well-known proponent of quality management, can be broken down into the following nine major steps:
1. Define the specifications for the product’s quality
2. Find and assess potential sources for the required parts.
3. Select the most dependable vendors to meet your productions’ needs.
4. Plan jointly for quality.
5. Establish teamwork and cooperation throughout the relationship
6. Verify that the standards and regulations are being followed
7. certify reliable vendors
8. Implement quality improvement strategies
9. Create and use supplier ratings and scorecards
Key metrics must be used in conjunction with these stages to assess and grade the quality assurance provided by IT vendors even before delivery. The percentage of items that fulfill quality requirements, the percentage of on-time and complete deliveries, and the new product introduction (NPI), which gauges the proportion of new products that adhere to volume, quality, and time standards, are common metrics.
Benefits of Quality Assurance for Suppliers
In a cutthroat industry, ensuring quality is not only necessary but also provides significant advantages that can influence the entire development process. Here are just a few instances of the top advantages for suppliers:
• Provides cost savings by eliminating waste of defective production and minimizing product failure rates
• Reduces cycle times by streamlining the quality assurance process of a company’s global network of suppliers
• Shortens time to market by optimizing procedures that are managed with the quality assurance process
• Protects companies from liabilities by error-proofing processes and producing defect-free products
• Minimizes a company’s risk of regulatory non-compliance and legal liabilities
Supplier Quality Assurance Across Industries
Many firms today are constantly evaluating their supply chains to fulfill demands that go beyond cost in the age of global networks. Organizations should use a risk-based strategy that looks at a supplier’s criticality as well as their failure likelihood in order to find possibilities for improvement within the supply chain. This can be accomplished by integrating enterprise systems with standardized risk and IT audit tools.
In the end, businesses exist to offer issues with answers. The ability of a vendor or supplier to offer high-quality IT goods that satisfy customer expectations is measured by supplier quality when evaluating IT vendors. Your company’s IT solutions aren’t fixing the issue if they don’t live up to client expectations.
You can make sure you’re consistently improving the lives of your consumers and going above and beyond their expectations by using effective supplier quality management (SQM) procedures.
Monitoring a supplier’s performance necessitates almost constant evaluation of the product’s quality, price, compliance, etc. Companies need a good mechanism to handle this properly. The advantages of SQM and precisely how to create a supplier quality management process that spares firms time, money, and hassles are covered in this course handbook.
Chapter 10: Supplier Performance
Supplier performance management (SPM) is a business strategy used to monitor, assess, and manage the performance of your vendors and suppliers in an effort to reduce expenses, lower risks, and promote continuous development. It’s an essential component of any evaluation process for IT vendors.
The main goal of SPM is to locate prospective problems and their underlying causes so that they can be quickly and amicably handled.
Why is supplier performance management important for your business?
Most businesses rely on their suppliers’ prompt deliveries, price cuts, and high-quality services to increase profits. As a result, the quality of the entire supply chain is directly impacted by the effective management of supplier performance.
To improve it, speed up its development, and guarantee the quality of services and/or products, an effective mechanism must be put in place.
Companies may guarantee and maintain the best service possible and get rid of suppliers that don’t meet performance standards by evaluating and comparing supplier performance.
Furthermore, supplier performance management paves the way for suppliers to comprehend the demands and expectations of the client. This may lead to a value-added strategic collaboration where the performance and competences of the suppliers develop over time. The mutual ability to achieve and retain market leadership with the greatest technology and business processes will determine how strong future success will be.
In order to actively manage crucial supplier relationships in a consistent, objective manner that produces actionable data, supplier performance management combines the elements of supplier segmentation, risk management, metrics management, and consequence management.
Your company can use that information to make smart supplier selection selections.
How can you measure supplier performance?
Strategic supplier relationships are now critical enough for some businesses to devote a significant amount of time and energy to creating performance indicators. However, because many supplier partnerships exist within or cross organizational boundaries of accountability, it is significantly harder to implement measurements and more probable that they will go unnoticed.
Senior management has started to pay more attention to supplier partnership performance measures as companies enter into more supplier partnerships and as partnerships gain significance in terms of their strategic and financial impact. Since you can’t manage something if you can’t measure it, this is a wonderful improvement.
The largest issues with performance measurement, according to the majority of businesses, have a lot to do with the methodology used to create and use measurements.
Metrics for partnerships must be developed and applied in a setting that, by necessity, crosses organizational barriers on the inside as well as the outside. If businesses want to successfully deploy metrics on individual relationships and across their entire partnership portfolio, they need to understand and manage this reality.
We advise adhering to the next six guidelines while adopting relationship metrics:
1. Ensure comparability of metrics across partnerships.
a. Define and discuss metrics with partnership representatives and create performance metrics for both sides.
b. Ensure clarity around implications of partner performance – good and poor.
c. Implement a process for auditing partnership performance.
d. Link partnership performance with individual performance evaluation.
e. Create a forum for reviewing and acting on partnership performance data.
Any business that uses effective supplier performance management makes sure that a supplier performs in accordance with the contract’s requirements and industry standards. It entails managing actual performance, identifying performance gaps, and deciding on steps to take in order to reach targeted performance levels.
In addition to ensuring that the advantages specified during the contracting stage are achieved, supplier performance management also makes sure that value delivery continues throughout the duration of the contract.
Companies’ success is becoming more and more reliant on the performance of strategic suppliers as they concentrate more on their core capabilities and outsource a larger portion of their work. Improving the performance of all parties to the contract and Service Level Agreement is the ultimate goal of supplier performance management.
Chapter 11: Classify Multiple Vendors
What is the Supplier Classification system?
In our day to day manufacturing operations, it’s a necessity to deal with some type of supplier for parts and other technical support. A supplier status is typically straight forward and follows the lifecycle steps; non-approved, pending approval, approved, probation or warning, phase-out, inactivated or disqualified. One of the best methods to established supplier classifications is to use the “Kraljic Portfolio Segmentation” model.
This model allows us to establish risk-based supplier selection, qualification and performance monitoring processes to focus supplier lifecycle management activities on the highest risk and impact products.
• Leverage items ( High profit, low supply risk)
Where items have high profitability, but a low-risk factor, purchasers have the balance of power in the relationship and leverage this strength to obtain greater revenues. Conventionally, procurement professionals have overburdened this status to lower prices, but increasingly more advanced companies are looking to unlock the innovative potential of their suppliers.
• Bottleneck products (Low-profit impact, high supply risk)
Here, the strength is in the hands of the supplier. The market consists of few suppliers that can behave proprietorship to force prices upward. Procurement Leaders found that these suppliers absorb more of buyers’ time compared to any other segment. The supplier relationship is demanding, even though they have a limited impact on company profitability. The market structure forces buyers to accept an unfavorable deal.
• Strategic Products (High profit, high supply risk)
These items only represent a handful of suppliers, but ensuring an effective and predictable supplier relationship is key to the future of the buying company. These products or parts deserve more attention from purchasing managers.
Managing such suppliers requires a diverse array of skills & experience. Unlike the non-critical items, each contract is unique and focuses upon the shared gains that equal partners enjoy in a collaborative relationship.
• Non-critical products (Low-profit impact, low supply risk)
The most commonly used example in this segment is office stationery. Although important for employees to perform their duties, pens and paper do not have a significant impact upon the business, nor does their absence represent a serious threat.
Chapter 12: Vendor Audit
All companies manage vendors to achieve SCM’s deliverable of supplying safe and reliable goods and services to customers, the operations. In vendor evaluation, auditing process is vital in offices and companies. It is done to do the required checks. It might be for the operations or it might also be done for the vendors who supply goods. Traditional vendor audit procedures are time-consuming and therefore very expensive for the average organization to undertake with the required scale and thoroughness. And they are often not particularly effective.
Services provided by IT vendors should be of quality and standard. Anything bad cannot be used by the company, because the end product reaches the customer. If the customer gets poor products or services then it degrades the image of company and customers will purchase it from other company. Due to these reasons, supplier audits are conducted by giant companies. There are different vendors and suppliers who supply goods to companies. It is necessary for companies to make a systematic check before approaching vendors. It is of paramount importance that the service/software is of good quality and standard. Once the product is developed in to finished good and it is circulated in the market, then it cannot be changed. So, if the software, for example, is of poor quality, then end product is definitely going to face lot of problems and issues. The customer might return the product with complaints.
A vendor audit is performed for a company that aims to attain an objective assessment of its contractors’ or vendors’ compliance to the terms, conditions and intent of the contracts and/or agreements between two entities. Vendor audits are necessary to effectively reduce cost and improve quality control throughout the procure-to-pay system. The primary areas of assessment in a vendor audit are vendor viability, management responsibility, system accuracy and data integrity, the latter of which being of particular importance in the modern business environment.
The main differences when comparing vendor audits to a typical internal audit are the focus, reporting and scope. The focus of a vendor audit encompasses examination of the entity’s quality management through its procedures and data processes, whereas an internal audit looks mainly at governances, risks and the controls in place to manage those risks. Vendor audits take into consideration the internal environment and the third-party provider’s adherence to established contracts.
The vendor audit provides assurance that the system is operating effectively and efficiently in the recording and payment of goods/services of appropriate quality, at the right time, in sufficient quantity and at an acceptable price. As a result, the reporting of the vendor audit is strictly to management, providing an opinion of the entity’s operating processes and controls as well as third party’s adherence to the standards set forth by the organization. The most desirable result of vendor audits is to achieve some level of cost reduction, which is achieved through not only direct cost reduction, but also process improvements and risk mitigation to help prevent future problems.
Curriculum
Leading IT Transformation – Workshop 12 – Vendor Evaluation
- Collect Vendor Data
- Price & Cost Analysis
- Managing Vendor Risk
- Vendor Communication
- Vendor Relationship
- Vendor Culture
- Vendor Stability
- Vendor Viability
- Vendor Quality
- Vendor Performance
- Classify Multiple Vendors
- Vendor Audit
Distance Learning
Introduction
Welcome to Appleton Greene and thank you for enrolling on the Leading IT Transformation corporate training program. You will be learning through our unique facilitation via distance-learning method, which will enable you to practically implement everything that you learn academically. The methods and materials used in your program have been designed and developed to ensure that you derive the maximum benefits and enjoyment possible. We hope that you find the program challenging and fun to do. However, if you have never been a distance-learner before, you may be experiencing some trepidation at the task before you. So we will get you started by giving you some basic information and guidance on how you can make the best use of the modules, how you should manage the materials and what you should be doing as you work through them. This guide is designed to point you in the right direction and help you to become an effective distance-learner. Take a few hours or so to study this guide and your guide to tutorial support for students, while making notes, before you start to study in earnest.
Study environment
You will need to locate a quiet and private place to study, preferably a room where you can easily be isolated from external disturbances or distractions. Make sure the room is well-lit and incorporates a relaxed, pleasant feel. If you can spoil yourself within your study environment, you will have much more of a chance to ensure that you are always in the right frame of mind when you do devote time to study. For example, a nice fire, the ability to play soft soothing background music, soft but effective lighting, perhaps a nice view if possible and a good size desk with a comfortable chair. Make sure that your family know when you are studying and understand your study rules. Your study environment is very important. The ideal situation, if at all possible, is to have a separate study, which can be devoted to you. If this is not possible then you will need to pay a lot more attention to developing and managing your study schedule, because it will affect other people as well as yourself. The better your study environment, the more productive you will be.
Study tools & rules
Try and make sure that your study tools are sufficient and in good working order. You will need to have access to a computer, scanner and printer, with access to the internet. You will need a very comfortable chair, which supports your lower back, and you will need a good filing system. It can be very frustrating if you are spending valuable study time trying to fix study tools that are unreliable, or unsuitable for the task. Make sure that your study tools are up to date. You will also need to consider some study rules. Some of these rules will apply to you and will be intended to help you to be more disciplined about when and how you study. This distance-learning guide will help you and after you have read it you can put some thought into what your study rules should be. You will also need to negotiate some study rules for your family, friends or anyone who lives with you. They too will need to be disciplined in order to ensure that they can support you while you study. It is important to ensure that your family and friends are an integral part of your study team. Having their support and encouragement can prove to be a crucial contribution to your successful completion of the program. Involve them in as much as you can.
Successful distance-learning
Distance-learners are freed from the necessity of attending regular classes or workshops, since they can study in their own way, at their own pace and for their own purposes. But unlike traditional internal training courses, it is the student’s responsibility, with a distance-learning program, to ensure that they manage their own study contribution. This requires strong self-discipline and self-motivation skills and there must be a clear will to succeed. Those students who are used to managing themselves, are good at managing others and who enjoy working in isolation, are more likely to be good distance-learners. It is also important to be aware of the main reasons why you are studying and of the main objectives that you are hoping to achieve as a result. You will need to remind yourself of these objectives at times when you need to motivate yourself. Never lose sight of your long-term goals and your short-term objectives. There is nobody available here to pamper you, or to look after you, or to spoon-feed you with information, so you will need to find ways to encourage and appreciate yourself while you are studying. Make sure that you chart your study progress, so that you can be sure of your achievements and re-evaluate your goals and objectives regularly.
Self-assessment
Appleton Greene training programs are in all cases post-graduate programs. Consequently, you should already have obtained a business-related degree and be an experienced learner. You should therefore already be aware of your study strengths and weaknesses. For example, which time of the day are you at your most productive? Are you a lark or an owl? What study methods do you respond to the most? Are you a consistent learner? How do you discipline yourself? How do you ensure that you enjoy yourself while studying? It is important to understand yourself as a learner and so some self-assessment early on will be necessary if you are to apply yourself correctly. Perform a SWOT analysis on yourself as a student. List your internal strengths and weaknesses as a student and your external opportunities and threats. This will help you later on when you are creating a study plan. You can then incorporate features within your study plan that can ensure that you are playing to your strengths, while compensating for your weaknesses. You can also ensure that you make the most of your opportunities, while avoiding the potential threats to your success.
Accepting responsibility as a student
Training programs invariably require a significant investment, both in terms of what they cost and in the time that you need to contribute to study and the responsibility for successful completion of training programs rests entirely with the student. This is never more apparent than when a student is learning via distance-learning. Accepting responsibility as a student is an important step towards ensuring that you can successfully complete your training program. It is easy to instantly blame other people or factors when things go wrong. But the fact of the matter is that if a failure is your failure, then you have the power to do something about it, it is entirely in your own hands. If it is always someone else’s failure, then you are powerless to do anything about it. All students study in entirely different ways, this is because we are all individuals and what is right for one student, is not necessarily right for another. In order to succeed, you will have to accept personal responsibility for finding a way to plan, implement and manage a personal study plan that works for you. If you do not succeed, you only have yourself to blame.
Planning
By far the most critical contribution to stress, is the feeling of not being in control. In the absence of planning we tend to be reactive and can stumble from pillar to post in the hope that things will turn out fine in the end. Invariably they don’t! In order to be in control, we need to have firm ideas about how and when we want to do things. We also need to consider as many possible eventualities as we can, so that we are prepared for them when they happen. Prescriptive Change, is far easier to manage and control, than Emergent Change. The same is true with distance-learning. It is much easier and much more enjoyable, if you feel that you are in control and that things are going to plan. Even when things do go wrong, you are prepared for them and can act accordingly without any unnecessary stress. It is important therefore that you do take time to plan your studies properly.
Management
Once you have developed a clear study plan, it is of equal importance to ensure that you manage the implementation of it. Most of us usually enjoy planning, but it is usually during implementation when things go wrong. Targets are not met and we do not understand why. Sometimes we do not even know if targets are being met. It is not enough for us to conclude that the study plan just failed. If it is failing, you will need to understand what you can do about it. Similarly if your study plan is succeeding, it is still important to understand why, so that you can improve upon your success. You therefore need to have guidelines for self-assessment so that you can be consistent with performance improvement throughout the program. If you manage things correctly, then your performance should constantly improve throughout the program.
Study objectives & tasks
The first place to start is developing your program objectives. These should feature your reasons for undertaking the training program in order of priority. Keep them succinct and to the point in order to avoid confusion. Do not just write the first things that come into your head because they are likely to be too similar to each other. Make a list of possible departmental headings, such as: Customer Service; E-business; Finance; Globalization; Human Resources; Technology; Legal; Management; Marketing and Production. Then brainstorm for ideas by listing as many things that you want to achieve under each heading and later re-arrange these things in order of priority. Finally, select the top item from each department heading and choose these as your program objectives. Try and restrict yourself to five because it will enable you to focus clearly. It is likely that the other things that you listed will be achieved if each of the top objectives are achieved. If this does not prove to be the case, then simply work through the process again.
Study forecast
As a guide, the Appleton Greene Leading IT Transformation corporate training program should take 12-18 months to complete, depending upon your availability and current commitments. The reason why there is such a variance in time estimates is because every student is an individual, with differing productivity levels and different commitments. These differentiations are then exaggerated by the fact that this is a distance-learning program, which incorporates the practical integration of academic theory as an as a part of the training program. Consequently all of the project studies are real, which means that important decisions and compromises need to be made. You will want to get things right and will need to be patient with your expectations in order to ensure that they are. We would always recommend that you are prudent with your own task and time forecasts, but you still need to develop them and have a clear indication of what are realistic expectations in your case. With reference to your time planning: consider the time that you can realistically dedicate towards study with the program every week; calculate how long it should take you to complete the program, using the guidelines featured here; then break the program down into logical modules and allocate a suitable proportion of time to each of them, these will be your milestones; you can create a time plan by using a spreadsheet on your computer, or a personal organizer such as MS Outlook, you could also use a financial forecasting software; break your time forecasts down into manageable chunks of time, the more specific you can be, the more productive and accurate your time management will be; finally, use formulas where possible to do your time calculations for you, because this will help later on when your forecasts need to change in line with actual performance. With reference to your task planning: refer to your list of tasks that need to be undertaken in order to achieve your program objectives; with reference to your time plan, calculate when each task should be implemented; remember that you are not estimating when your objectives will be achieved, but when you will need to focus upon implementing the corresponding tasks; you also need to ensure that each task is implemented in conjunction with the associated training modules which are relevant; then break each single task down into a list of specific to do’s, say approximately ten to do’s for each task and enter these into your study plan; once again you could use MS Outlook to incorporate both your time and task planning and this could constitute your study plan; you could also use a project management software like MS Project. You should now have a clear and realistic forecast detailing when you can expect to be able to do something about undertaking the tasks to achieve your program objectives.
Performance management
It is one thing to develop your study forecast, it is quite another to monitor your progress. Ultimately it is less important whether you achieve your original study forecast and more important that you update it so that it constantly remains realistic in line with your performance. As you begin to work through the program, you will begin to have more of an idea about your own personal performance and productivity levels as a distance-learner. Once you have completed your first study module, you should re-evaluate your study forecast for both time and tasks, so that they reflect your actual performance level achieved. In order to achieve this you must first time yourself while training by using an alarm clock. Set the alarm for hourly intervals and make a note of how far you have come within that time. You can then make a note of your actual performance on your study plan and then compare your performance against your forecast. Then consider the reasons that have contributed towards your performance level, whether they are positive or negative and make a considered adjustment to your future forecasts as a result. Given time, you should start achieving your forecasts regularly.
With reference to time management: time yourself while you are studying and make a note of the actual time taken in your study plan; consider your successes with time-efficiency and the reasons for the success in each case and take this into consideration when reviewing future time planning; consider your failures with time-efficiency and the reasons for the failures in each case and take this into consideration when reviewing future time planning; re-evaluate your study forecast in relation to time planning for the remainder of your training program to ensure that you continue to be realistic about your time expectations. You need to be consistent with your time management, otherwise you will never complete your studies. This will either be because you are not contributing enough time to your studies, or you will become less efficient with the time that you do allocate to your studies. Remember, if you are not in control of your studies, they can just become yet another cause of stress for you.
With reference to your task management: time yourself while you are studying and make a note of the actual tasks that you have undertaken in your study plan; consider your successes with task-efficiency and the reasons for the success in each case; take this into consideration when reviewing future task planning; consider your failures with task-efficiency and the reasons for the failures in each case and take this into consideration when reviewing future task planning; re-evaluate your study forecast in relation to task planning for the remainder of your training program to ensure that you continue to be realistic about your task expectations. You need to be consistent with your task management, otherwise you will never know whether you are achieving your program objectives or not.
Keeping in touch
You will have access to qualified and experienced professors and tutors who are responsible for providing tutorial support for your particular training program. So don’t be shy about letting them know how you are getting on. We keep electronic records of all tutorial support emails so that professors and tutors can review previous correspondence before considering an individual response. It also means that there is a record of all communications between you and your professors and tutors and this helps to avoid any unnecessary duplication, misunderstanding, or misinterpretation. If you have a problem relating to the program, share it with them via email. It is likely that they have come across the same problem before and are usually able to make helpful suggestions and steer you in the right direction. To learn more about when and how to use tutorial support, please refer to the Tutorial Support section of this student information guide. This will help you to ensure that you are making the most of tutorial support that is available to you and will ultimately contribute towards your success and enjoyment with your training program.
Work colleagues and family
You should certainly discuss your program study progress with your colleagues, friends and your family. Appleton Greene training programs are very practical. They require you to seek information from other people, to plan, develop and implement processes with other people and to achieve feedback from other people in relation to viability and productivity. You will therefore have plenty of opportunities to test your ideas and enlist the views of others. People tend to be sympathetic towards distance-learners, so don’t bottle it all up in yourself. Get out there and share it! It is also likely that your family and colleagues are going to benefit from your labors with the program, so they are likely to be much more interested in being involved than you might think. Be bold about delegating work to those who might benefit themselves. This is a great way to achieve understanding and commitment from people who you may later rely upon for process implementation. Share your experiences with your friends and family.
Making it relevant
The key to successful learning is to make it relevant to your own individual circumstances. At all times you should be trying to make bridges between the content of the program and your own situation. Whether you achieve this through quiet reflection or through interactive discussion with your colleagues, client partners or your family, remember that it is the most important and rewarding aspect of translating your studies into real self-improvement. You should be clear about how you want the program to benefit you. This involves setting clear study objectives in relation to the content of the course in terms of understanding, concepts, completing research or reviewing activities and relating the content of the modules to your own situation. Your objectives may understandably change as you work through the program, in which case you should enter the revised objectives on your study plan so that you have a permanent reminder of what you are trying to achieve, when and why.
Distance-learning check-list
Prepare your study environment, your study tools and rules.
Undertake detailed self-assessment in terms of your ability as a learner.
Create a format for your study plan.
Consider your study objectives and tasks.
Create a study forecast.
Assess your study performance.
Re-evaluate your study forecast.
Be consistent when managing your study plan.
Use your Appleton Greene Certified Learning Provider (CLP) for tutorial support.
Make sure you keep in touch with those around you.
Tutorial Support
Programs
Appleton Greene uses standard and bespoke corporate training programs as vessels to transfer business process improvement knowledge into the heart of our clients’ organizations. Each individual program focuses upon the implementation of a specific business process, which enables clients to easily quantify their return on investment. There are hundreds of established Appleton Greene corporate training products now available to clients within customer services, e-business, finance, globalization, human resources, information technology, legal, management, marketing and production. It does not matter whether a client’s employees are located within one office, or an unlimited number of international offices, we can still bring them together to learn and implement specific business processes collectively. Our approach to global localization enables us to provide clients with a truly international service with that all important personal touch. Appleton Greene corporate training programs can be provided virtually or locally and they are all unique in that they individually focus upon a specific business function. They are implemented over a sustainable period of time and professional support is consistently provided by qualified learning providers and specialist consultants.
Support available
You will have a designated Certified Learning Provider (CLP) and an Accredited Consultant and we encourage you to communicate with them as much as possible. In all cases tutorial support is provided online because we can then keep a record of all communications to ensure that tutorial support remains consistent. You would also be forwarding your work to the tutorial support unit for evaluation and assessment. You will receive individual feedback on all of the work that you undertake on a one-to-one basis, together with specific recommendations for anything that may need to be changed in order to achieve a pass with merit or a pass with distinction and you then have as many opportunities as you may need to re-submit project studies until they meet with the required standard. Consequently the only reason that you should really fail (CLP) is if you do not do the work. It makes no difference to us whether a student takes 12 months or 18 months to complete the program, what matters is that in all cases the same quality standard will have been achieved.
Support Process
Please forward all of your future emails to the designated (CLP) Tutorial Support Unit email address that has been provided and please do not duplicate or copy your emails to other AGC email accounts as this will just cause unnecessary administration. Please note that emails are always answered as quickly as possible but you will need to allow a period of up to 20 business days for responses to general tutorial support emails during busy periods, because emails are answered strictly within the order in which they are received. You will also need to allow a period of up to 30 business days for the evaluation and assessment of project studies. This does not include weekends or public holidays. Please therefore kindly allow for this within your time planning. All communications are managed online via email because it enables tutorial service support managers to review other communications which have been received before responding and it ensures that there is a copy of all communications retained on file for future reference. All communications will be stored within your personal (CLP) study file here at Appleton Greene throughout your designated study period. If you need any assistance or clarification at any time, please do not hesitate to contact us by forwarding an email and remember that we are here to help. If you have any questions, please list and number your questions succinctly and you can then be sure of receiving specific answers to each and every query.
Time Management
It takes approximately 1 Year to complete the Leading IT Transformation corporate training program, incorporating 12 x 6-hour monthly workshops. Each student will also need to contribute approximately 4 hours per week over 1 Year of their personal time. Students can study from home or work at their own pace and are responsible for managing their own study plan. There are no formal examinations and students are evaluated and assessed based upon their project study submissions, together with the quality of their internal analysis and supporting documents. They can contribute more time towards study when they have the time to do so and can contribute less time when they are busy. All students tend to be in full time employment while studying and the Leading IT Transformation program is purposely designed to accommodate this, so there is plenty of flexibility in terms of time management. It makes no difference to us at Appleton Greene, whether individuals take 12-18 months to complete this program. What matters is that in all cases the same standard of quality will have been achieved with the standard and bespoke programs that have been developed.
Distance Learning Guide
The distance learning guide should be your first port of call when starting your training program. It will help you when you are planning how and when to study, how to create the right environment and how to establish the right frame of mind. If you can lay the foundations properly during the planning stage, then it will contribute to your enjoyment and productivity while training later. The guide helps to change your lifestyle in order to accommodate time for study and to cultivate good study habits. It helps you to chart your progress so that you can measure your performance and achieve your goals. It explains the tools that you will need for study and how to make them work. It also explains how to translate academic theory into practical reality. Spend some time now working through your distance learning guide and make sure that you have firm foundations in place so that you can make the most of your distance learning program. There is no requirement for you to attend training workshops or classes at Appleton Greene offices. The entire program is undertaken online, program course manuals and project studies are administered via the Appleton Greene web site and via email, so you are able to study at your own pace and in the comfort of your own home or office as long as you have a computer and access to the internet.
How To Study
The how to study guide provides students with a clear understanding of the Appleton Greene facilitation via distance learning training methods and enables students to obtain a clear overview of the training program content. It enables students to understand the step-by-step training methods used by Appleton Greene and how course manuals are integrated with project studies. It explains the research and development that is required and the need to provide evidence and references to support your statements. It also enables students to understand precisely what will be required of them in order to achieve a pass with merit and a pass with distinction for individual project studies and provides useful guidance on how to be innovative and creative when developing your Unique Program Proposition (UPP).
Tutorial Support
Tutorial support for the Appleton Greene Leading IT Transformation corporate training program is provided online either through the Appleton Greene Client Support Portal (CSP), or via email. All tutorial support requests are facilitated by a designated Program Administration Manager (PAM). They are responsible for deciding which professor or tutor is the most appropriate option relating to the support required and then the tutorial support request is forwarded onto them. Once the professor or tutor has completed the tutorial support request and answered any questions that have been asked, this communication is then returned to the student via email by the designated Program Administration Manager (PAM). This enables all tutorial support, between students, professors and tutors, to be facilitated by the designated Program Administration Manager (PAM) efficiently and securely through the email account. You will therefore need to allow a period of up to 20 business days for responses to general support queries and up to 30 business days for the evaluation and assessment of project studies, because all tutorial support requests are answered strictly within the order in which they are received. This does not include weekends or public holidays. Consequently you need to put some thought into the management of your tutorial support procedure in order to ensure that your study plan is feasible and to obtain the maximum possible benefit from tutorial support during your period of study. Please retain copies of your tutorial support emails for future reference. Please ensure that ALL of your tutorial support emails are set out using the format as suggested within your guide to tutorial support. Your tutorial support emails need to be referenced clearly to the specific part of the course manual or project study which you are working on at any given time. You also need to list and number any questions that you would like to ask, up to a maximum of five questions within each tutorial support email. Remember the more specific you can be with your questions the more specific your answers will be too and this will help you to avoid any unnecessary misunderstanding, misinterpretation, or duplication. The guide to tutorial support is intended to help you to understand how and when to use support in order to ensure that you get the most out of your training program. Appleton Greene training programs are designed to enable you to do things for yourself. They provide you with a structure or a framework and we use tutorial support to facilitate students while they practically implement what they learn. In other words, we are enabling students to do things for themselves. The benefits of distance learning via facilitation are considerable and are much more sustainable in the long-term than traditional short-term knowledge sharing programs. Consequently you should learn how and when to use tutorial support so that you can maximize the benefits from your learning experience with Appleton Greene. This guide describes the purpose of each training function and how to use them and how to use tutorial support in relation to each aspect of the training program. It also provides useful tips and guidance with regard to best practice.
Tutorial Support Tips
Students are often unsure about how and when to use tutorial support with Appleton Greene. This Tip List will help you to understand more about how to achieve the most from using tutorial support. Refer to it regularly to ensure that you are continuing to use the service properly. Tutorial support is critical to the success of your training experience, but it is important to understand when and how to use it in order to maximize the benefit that you receive. It is no coincidence that those students who succeed are those that learn how to be positive, proactive and productive when using tutorial support.
Be positive and friendly with your tutorial support emails
Remember that if you forward an email to the tutorial support unit, you are dealing with real people. “Do unto others as you would expect others to do unto you”. If you are positive, complimentary and generally friendly in your emails, you will generate a similar response in return. This will be more enjoyable, productive and rewarding for you in the long-term.
Think about the impression that you want to create
Every time that you communicate, you create an impression, which can be either positive or negative, so put some thought into the impression that you want to create. Remember that copies of all tutorial support emails are stored electronically and tutors will always refer to prior correspondence before responding to any current emails. Over a period of time, a general opinion will be arrived at in relation to your character, attitude and ability. Try to manage your own frustrations, mood swings and temperament professionally, without involving the tutorial support team. Demonstrating frustration or a lack of patience is a weakness and will be interpreted as such. The good thing about communicating in writing, is that you will have the time to consider your content carefully, you can review it and proof-read it before sending your email to Appleton Greene and this should help you to communicate more professionally, consistently and to avoid any unnecessary knee-jerk reactions to individual situations as and when they may arise. Please also remember that the CLP Tutorial Support Unit will not just be responsible for evaluating and assessing the quality of your work, they will also be responsible for providing recommendations to other learning providers and to client contacts within the Appleton Greene global client network, so do be in control of your own emotions and try to create a good impression.
Remember that quality is preferred to quantity
Please remember that when you send an email to the tutorial support team, you are not using Twitter or Text Messaging. Try not to forward an email every time that you have a thought. This will not prove to be productive either for you or for the tutorial support team. Take time to prepare your communications properly, as if you were writing a professional letter to a business colleague and make a list of queries that you are likely to have and then incorporate them within one email, say once every month, so that the tutorial support team can understand more about context, application and your methodology for study. Get yourself into a consistent routine with your tutorial support requests and use the tutorial support template provided with ALL of your emails. The (CLP) Tutorial Support Unit will not spoon-feed you with information. They need to be able to evaluate and assess your tutorial support requests carefully and professionally.
Be specific about your questions in order to receive specific answers
Try not to write essays by thinking as you are writing tutorial support emails. The tutorial support unit can be unclear about what in fact you are asking, or what you are looking to achieve. Be specific about asking questions that you want answers to. Number your questions. You will then receive specific answers to each and every question. This is the main purpose of tutorial support via email.
Keep a record of your tutorial support emails
It is important that you keep a record of all tutorial support emails that are forwarded to you. You can then refer to them when necessary and it avoids any unnecessary duplication, misunderstanding, or misinterpretation.
Individual training workshops or telephone support
Please be advised that Appleton Greene does not provide separate or individual tutorial support meetings, workshops, or provide telephone support for individual students. Appleton Greene is an equal opportunities learning and service provider and we are therefore understandably bound to treat all students equally. We cannot therefore broker special financial or study arrangements with individual students regardless of the circumstances. All tutorial support is provided online and this enables Appleton Greene to keep a record of all communications between students, professors and tutors on file for future reference, in accordance with our quality management procedure and your terms and conditions of enrolment. All tutorial support is provided online via email because it enables us to have time to consider support content carefully, it ensures that you receive a considered and detailed response to your queries. You can number questions that you would like to ask, which relate to things that you do not understand or where clarification may be required. You can then be sure of receiving specific answers to each individual query. You will also then have a record of these communications and of all tutorial support, which has been provided to you. This makes tutorial support administration more productive by avoiding any unnecessary duplication, misunderstanding, or misinterpretation.
Tutorial Support Email Format
You should use this tutorial support format if you need to request clarification or assistance while studying with your training program. Please note that ALL of your tutorial support request emails should use the same format. You should therefore set up a standard email template, which you can then use as and when you need to. Emails that are forwarded to Appleton Greene, which do not use the following format, may be rejected and returned to you by the (CLP) Program Administration Manager. A detailed response will then be forwarded to you via email usually within 20 business days of receipt for general support queries and 30 business days for the evaluation and assessment of project studies. This does not include weekends or public holidays. Your tutorial support request, together with the corresponding TSU reply, will then be saved and stored within your electronic TSU file at Appleton Greene for future reference.
Subject line of your email
Please insert: Appleton Greene (CLP) Tutorial Support Request: (Your Full Name) (Date), within the subject line of your email.
Main body of your email
Please insert:
1. Appleton Greene Certified Learning Provider (CLP) Tutorial Support Request
2. Your Full Name
3. Date of TS request
4. Preferred email address
5. Backup email address
6. Course manual page name or number (reference)
7. Project study page name or number (reference)
Subject of enquiry
Please insert a maximum of 50 words (please be succinct)
Briefly outline the subject matter of your inquiry, or what your questions relate to.
Question 1
Maximum of 50 words (please be succinct)
Maximum of 50 words (please be succinct)
Question 3
Maximum of 50 words (please be succinct)
Question 4
Maximum of 50 words (please be succinct)
Question 5
Maximum of 50 words (please be succinct)
Please note that a maximum of 5 questions is permitted with each individual tutorial support request email.
Procedure
* List the questions that you want to ask first, then re-arrange them in order of priority. Make sure that you reference them, where necessary, to the course manuals or project studies.
* Make sure that you are specific about your questions and number them. Try to plan the content within your emails to make sure that it is relevant.
* Make sure that your tutorial support emails are set out correctly, using the Tutorial Support Email Format provided here.
* Save a copy of your email and incorporate the date sent after the subject title. Keep your tutorial support emails within the same file and in date order for easy reference.
* Allow up to 20 business days for a response to general tutorial support emails and up to 30 business days for the evaluation and assessment of project studies, because detailed individual responses will be made in all cases and tutorial support emails are answered strictly within the order in which they are received.
* Emails can and do get lost. So if you have not received a reply within the appropriate time, forward another copy or a reminder to the tutorial support unit to be sure that it has been received but do not forward reminders unless the appropriate time has elapsed.
* When you receive a reply, save it immediately featuring the date of receipt after the subject heading for easy reference. In most cases the tutorial support unit replies to your questions individually, so you will have a record of the questions that you asked as well as the answers offered. With project studies however, separate emails are usually forwarded by the tutorial support unit, so do keep a record of your own original emails as well.
* Remember to be positive and friendly in your emails. You are dealing with real people who will respond to the same things that you respond to.
* Try not to repeat questions that have already been asked in previous emails. If this happens the tutorial support unit will probably just refer you to the appropriate answers that have already been provided within previous emails.
* If you lose your tutorial support email records you can write to Appleton Greene to receive a copy of your tutorial support file, but a separate administration charge may be levied for this service.
How To Study
Your Certified Learning Provider (CLP) and Accredited Consultant can help you to plan a task list for getting started so that you can be clear about your direction and your priorities in relation to your training program. It is also a good way to introduce yourself to the tutorial support team.
Planning your study environment
Your study conditions are of great importance and will have a direct effect on how much you enjoy your training program. Consider how much space you will have, whether it is comfortable and private and whether you are likely to be disturbed. The study tools and facilities at your disposal are also important to the success of your distance-learning experience. Your tutorial support unit can help with useful tips and guidance, regardless of your starting position. It is important to get this right before you start working on your training program.
Planning your program objectives
It is important that you have a clear list of study objectives, in order of priority, before you start working on your training program. Your tutorial support unit can offer assistance here to ensure that your study objectives have been afforded due consideration and priority.
Planning how and when to study
Distance-learners are freed from the necessity of attending regular classes, since they can study in their own way, at their own pace and for their own purposes. This approach is designed to let you study efficiently away from the traditional classroom environment. It is important however, that you plan how and when to study, so that you are making the most of your natural attributes, strengths and opportunities. Your tutorial support unit can offer assistance and useful tips to ensure that you are playing to your strengths.
Planning your study tasks
You should have a clear understanding of the study tasks that you should be undertaking and the priority associated with each task. These tasks should also be integrated with your program objectives. The distance learning guide and the guide to tutorial support for students should help you here, but if you need any clarification or assistance, please contact your tutorial support unit.
Planning your time
You will need to allocate specific times during your calendar when you intend to study if you are to have a realistic chance of completing your program on time. You are responsible for planning and managing your own study time, so it is important that you are successful with this. Your tutorial support unit can help you with this if your time plan is not working.
Keeping in touch
Consistency is the key here. If you communicate too frequently in short bursts, or too infrequently with no pattern, then your management ability with your studies will be questioned, both by you and by your tutorial support unit. It is obvious when a student is in control and when one is not and this will depend how able you are at sticking with your study plan. Inconsistency invariably leads to in-completion.
Charting your progress
Your tutorial support team can help you to chart your own study progress. Refer to your distance learning guide for further details.
Making it work
To succeed, all that you will need to do is apply yourself to undertaking your training program and interpreting it correctly. Success or failure lies in your hands and your hands alone, so be sure that you have a strategy for making it work. Your Certified Learning Provider (CLP) and Accredited Consultant can guide you through the process of program planning, development and implementation.
Reading methods
Interpretation is often unique to the individual but it can be improved and even quantified by implementing consistent interpretation methods. Interpretation can be affected by outside interference such as family members, TV, or the Internet, or simply by other thoughts which are demanding priority in our minds. One thing that can improve our productivity is using recognized reading methods. This helps us to focus and to be more structured when reading information for reasons of importance, rather than relaxation.
Speed reading
When reading through course manuals for the first time, subconsciously set your reading speed to be just fast enough that you cannot dwell on individual words or tables. With practice, you should be able to read an A4 sheet of paper in one minute. You will not achieve much in the way of a detailed understanding, but your brain will retain a useful overview. This overview will be important later on and will enable you to keep individual issues in perspective with a more generic picture because speed reading appeals to the memory part of the brain. Do not worry about what you do or do not remember at this stage.
Content reading
Once you have speed read everything, you can then start work in earnest. You now need to read a particular section of your course manual thoroughly, by making detailed notes while you read. This process is called Content Reading and it will help to consolidate your understanding and interpretation of the information that has been provided.
Making structured notes on the course manuals
When you are content reading, you should be making detailed notes, which are both structured and informative. Make these notes in a MS Word document on your computer, because you can then amend and update these as and when you deem it to be necessary. List your notes under three headings: 1. Interpretation – 2. Questions – 3. Tasks. The purpose of the 1st section is to clarify your interpretation by writing it down. The purpose of the 2nd section is to list any questions that the issue raises for you. The purpose of the 3rd section is to list any tasks that you should undertake as a result. Anyone who has graduated with a business-related degree should already be familiar with this process.
Organizing structured notes separately
You should then transfer your notes to a separate study notebook, preferably one that enables easy referencing, such as a MS Word Document, a MS Excel Spreadsheet, a MS Access Database, or a personal organizer on your cell phone. Transferring your notes allows you to have the opportunity of cross-checking and verifying them, which assists considerably with understanding and interpretation. You will also find that the better you are at doing this, the more chance you will have of ensuring that you achieve your study objectives.
Question your understanding
Do challenge your understanding. Explain things to yourself in your own words by writing things down.
Clarifying your understanding
If you are at all unsure, forward an email to your tutorial support unit and they will help to clarify your understanding.
Question your interpretation
Do challenge your interpretation. Qualify your interpretation by writing it down.
Clarifying your interpretation
If you are at all unsure, forward an email to your tutorial support unit and they will help to clarify your interpretation.
Qualification Requirements
The student will need to successfully complete the project study and all of the exercises relating to the Leading IT Transformation corporate training program, achieving a pass with merit or distinction in each case, in order to qualify as an Accredited Leading IT Transformation Specialist (ALITTS). All monthly workshops need to be tried and tested within your company. These project studies can be completed in your own time and at your own pace and in the comfort of your own home or office. There are no formal examinations, assessment is based upon the successful completion of the project studies. They are called project studies because, unlike case studies, these projects are not theoretical, they incorporate real program processes that need to be properly researched and developed. The project studies assist us in measuring your understanding and interpretation of the training program and enable us to assess qualification merits. All of the project studies are based entirely upon the content within the training program and they enable you to integrate what you have learnt into your corporate training practice.
Leading IT Transformation – Grading Contribution
Project Study – Grading Contribution
Customer Service – 10%
E-business – 05%
Finance – 10%
Globalization – 10%
Human Resources – 10%
Information Technology – 10%
Legal – 05%
Management – 10%
Marketing – 10%
Production – 10%
Education – 05%
Logistics – 05%
TOTAL GRADING – 100%
Qualification grades
A mark of 90% = Pass with Distinction.
A mark of 75% = Pass with Merit.
A mark of less than 75% = Fail.
If you fail to achieve a mark of 75% with a project study, you will receive detailed feedback from the Certified Learning Provider (CLP) and/or Accredited Consultant, together with a list of tasks which you will need to complete, in order to ensure that your project study meets with the minimum quality standard that is required by Appleton Greene. You can then re-submit your project study for further evaluation and assessment. Indeed you can re-submit as many drafts of your project studies as you need to, until such a time as they eventually meet with the required standard by Appleton Greene, so you need not worry about this, it is all part of the learning process.
When marking project studies, Appleton Greene is looking for sufficient evidence of the following:
Pass with merit
A satisfactory level of program understanding
A satisfactory level of program interpretation
A satisfactory level of project study content presentation
A satisfactory level of Unique Program Proposition (UPP) quality
A satisfactory level of the practical integration of academic theory
Pass with distinction
An exceptional level of program understanding
An exceptional level of program interpretation
An exceptional level of project study content presentation
An exceptional level of Unique Program Proposition (UPP) quality
An exceptional level of the practical integration of academic theory
Preliminary Analysis
Research Paper
“Designing vendor evaluation systems: An empirical analysis
Journal of Purchasing and Supply Management,
Volume 20, Issue 2, June 2014,
Highlights
• We investigate how vendor evaluation systems (VESs) are designed and executed in large international firms.
• We investigate benefits and costs achieved through VESs by firms.
• We conduct multiple case studies in different industries.
• We identify the variables connected to the satisfaction with the VES.
Abstract
Companies today are increasing efforts to develop their vendor evaluation system (VES) to qualify and select the best suppliers, monitor their performance and foster continuous improvement. VES lies at the intersection of three disciplines: purchasing management, supply chain management, and performance management. The extant literature especially focuses on vendor rating tools from a mathematical modeling standpoint, whereas firms are mostly concerned with guidelines necessary to design and implement an effective VES. The present study develops an encompassing research framework to investigate VES by means of thirteen case studies. In particular, the paper investigates VES design in terms of strategic alignment, process configuration and execution, as well as corresponding benefits and costs, exploring how the combination of the previous elements determines company satisfaction. Three groups of VESs are identified, leading to different levels of satisfaction.
1. Introduction
The impact of suppliers on firm performance can be quite relevant not only to costs but also to quality, time, innovation and sustainability (Carr and Pearson, 1999, Lambert et al., 1996, Cousins and Spekman, 2003, Caniato et al., 2012). As a consequence, performance measurement broadens its scope from within a company to the entire supply/value chain (Christopher, 1998, Hald and Ellegaard, 2011). At the same time, purchasing departments increase in importance, and their role evolves from transactional to strategic (Ellram and Carr, 1994, McIvor et al., 1997, Cavinato, 1999), including the active management of supply relationships (Monczka and Trent, 1995; Carter and Narasimhan, 1995), which has evolved from an arm׳s-length approach to more collaborative approaches (Lamming, 1993).
Competitiveness is increasingly anchored to the appropriate selection and management of a supply base (e.g., Choi and Hartley, 1996, Huang and Keskar, 2007). Choosing the right supplier among existing suppliers, finding a new supplier, monitoring supplier performance, and operating supplier development programs require mastery of an effective Vendor Evaluation System (VES). Although most purchasing and supply chain managers would agree that such knowledge is important, several firms still lack a formal and comprehensive VES (from qualification to vendor rating). Moreover, the literature does not currently provide the necessary evidence to support this practice because it primarily proposes a very high number of indicators to evaluate suppliers and more generally, very complex algorithms and mathematical models (e.g., De Boer and Van der Wegen, 2003, Narasimhan and Talluri, 2006). These methods are far from managers׳ actual needs (Brun and Pero, 2011), whereas clear guidelines for designing and implementing VESs are lacking (Huang and Keskar, 2007).
We structure this paper as follows: an overview of the relevant literature precedes our research questions and methodology. Next, we report our main results regarding the strategic alignment of the VES, process, execution, benefits and costs. Finally, we discuss the connection between these elements and user satisfaction to provide useful contributions for scholars and managers.
2. Literature review
The importance of vendor qualification, selection and evaluation is well recognized in the literature (Carr and Pearson, 1999, Kannan and Tan, 2002, Spina et al., 2013), along with the negative effects that an erroneous selection may cause (Carter et al., 2010). For example, the productive stream of research related to supplier development strategies (Handfield et al., 2000, Humphreys et al., 2004, Narasimhan and Jayaram, 1998, Sako, 2004, Sanchez-Rodriguez et al., 2005) acknowledges the importance of supplier evaluation (Frey and Schlosser, 1993, Galt and Dale, 1991, Krause and Scannell, 2002, Krause et al., 1998; Watts and Hahn, 1993) as a preliminary step for supplier development. In particular, Hahn et al. (1990) distinguish between narrow and passive programs that emphasize supplier evaluation and broader approaches that include proactive customer efforts to improve suppliers׳ capabilities.
However, on the one hand, companies are often incapable of properly leveraging the benefits that arise out of the evaluation process (Van der Rhee et al., 2009). On the other hand, the research still lacks an appropriate framework for suggesting to managers how to effectively design and implement a comprehensive and effective VES (Huang and Keskar, 2007).
Indeed, many studies have been conducted on the indicators (e.g., Weber et al., 1991, Wilson, 1994, Choi and Hartley, 1996, Vonderembse and Tracey, 1999, De Boer et al., 2001, Sharland et al., 2003) and methods suitable for vendor selection and evaluation (e.g., Bhutta and Huq, 2002, Muralidharan et al., 2002, Sarkis and Talluri, 2002, De Boer and Van der Wegen, 2003, Narasimhan and Talluri, 2006, Teng and Jaramillo, 2005), but few studies have been conducted on other important areas of study, such as the main design variables of a VES, the structure of the evaluation process, and the benefits and costs associated with the use of a VES (De Boer et al., 2001).
Furthermore, company requirements and research outputs seem to be somewhat misaligned because the evaluation methods normally employed by companies are far simpler than those proposed in the literature (Brun and Pero, 2011). Surprisingly, to the best of our knowledge, VES design is at the core of very few studies, except for common purchasing and supply management textbooks (e.g., Van Weele, 2009, Monczka et al., 2010). Indeed, according to Carter et al. (2010), the VES literature can be divided into two main streams– namely, indicators and methods – that are briefly discussed later in this paper. There is little evidence related to other aspects of vendor evaluation, such as key design variables (i.e., the variables that drive system architecture), process (i.e., the stages of evaluation), system execution, and benefits and costs associated with the use of a VES.
All in all, the literature primarily addresses the issue of supplier evaluation by adopting an engineering perspective, not a managerial one. According to the engineering perspective, scholars treat supplier selection as an optimization problem (Huang and Keskar, 2007). We, however, seek to contribute to research and practice by clarifying how a VES is designed and implemented, highlighting the key decisions and actors involved.”
To continue reading this research paper, please visit: www.sciencedirect.com
Research Paper
“Supplier evaluation: The first step in effective sourcing
Introduction
Problem Statement
Supplier evaluation is an issue of strategic importance for any company. Measuring supplier performance is essential to ensure a well-functioning supply chain and company competitiveness. The goal is to improve performance mainly of the key suppliers. Understanding supplier performance will both prevent risk and improve cooperation. Evaluation is necessary to know what the supplier is doing well in each area of action. Careful selection of evaluation criteria is
important.
Background and trends
There have been many approaches to evaluating supplier performance. Previously, supplier evaluation criteria focused on delivery performance, quality and price. Today, we see both in practice and in literature several criteria focusing on other areas, such as relationship of partners and continuous improvement.
Objectives
This article discusses some of best practices currently in use and point out the importance of the supplier evaluation theme. The goal is not to find the perfect supplier evaluation matrix, but to find the set of indicators used most often for supplier performance evaluation. The article presents a review of a number of articles relating to supplier performance as well as a case study of an existing company’s supplier performance and its details of calculation.
General supplier evaluation
The majority of supplier evaluations consist of only three factors: price, quality and delivery (Hirakubo & Kublin 1998; Howard 1998). Degraeve and Roodhooft (1999) argued that supplier selection and evaluation are most often based on price, which, in turn, results in additional costs to the buyer because of unreliable delivery, limited quantities, inferior quality and inadequate communication.
According to a study on the evaluation processes of the supplier (Simpson, Siguaw & White 2002) only a limited number of buyers have a formal supplier evaluation process in place. This is an important finding as suppliers can influence the inventory status of a company on a high level.
Supplier selection has to be first step. Selection of the supplier plays a role in profitability and companies should pay attention to the selection when awarding contracts. According to Jayaraman, Srivastava and Benton (1999) the selection of a new supplier may result in additional fixed costs as a company may have to invest in new machinery, staff training or implementing new technologies.
Multicriteria decision-making techniques for supplier evaluation
In a situation where one supplier provides goods at low rates but is unable to deliver on time whilst another provides high-quality goods but at unacceptable prices, a company has to use appropriate supplier selection techniques. Supplier selection is an issue related to the multicriteria decision-making (MCDM) problem. Numerous evaluating criteria have to relate to the requirements of the company. Therefore, it is crucial to analyse and prioritise different selection methods to satisfy stakeholders. Using methods such as data envelopment analysis and analytical hierarchy processes, a company can evaluate suppliers for optimal selection. The chosen approach has to be company specific, as each company has to identify the most important criteria for selecting the best supplier based on company strategy, industry type and needs.
Researchers use different methodologies of MCDM to solve supplier evaluation and selection problems. According to Agarval (n.d.) data envelopment analysis is the most often used MCDM approach (30%), followed, in order of distribution, by mathematical programming (17%), analytical hierarchy processes (15%), case-based reasoning (11%), fuzzy set theory (10%) and analytical network processes (5%). It is evident that cost alone is no longer the leading criterion driving supplier selection. Instead, quality and delivery performance also are contributing factors. Many evaluation criteria can arise from the requirements of the company. It is important to analyse and prioritise various evaluation methods to select the most appropriate one. Applying methods such as the aforementioned, we can assess suppliers for optimal supplier selection. Agarval et al. (n.d.) concluded that analytical hierarchy processes can be used as a helpful tool for evaluating suppliers.
Key performance indicators
Key performance indicators are quantifiable measurements, agreed to beforehand, that reflect the critical success factors of an organisation. They should reflect the organisation‘s goals, contribute to its success and be measurable. Key performance indicators are usually long-term considerations. Their definition and how they are measured do not change often. The goals for a particular key performance indicator may change as the goals of the organisation change or as the organisation approaches its goals.
Common indicators of supplier performance matrix
In supply chain management, the buyer-supplier relationship is critical to achieving the strategic goals of a company. Supplier evaluation processes can be both formal and informal and matrices are an important tool in determining the long-term success of a company.”
To continue reading this paper, please visit www.researchgate.net
Online Article
“I Broke All Six Rules for Finding the Right IT Vendor
By Robert Plant,
Harvard Business Review,
March 15, 2011
Never underestimate a vendor’s willingness to say yes to a project that it knows it won’t be able to carry out. I’m entitled to give this advice because I did exactly that.
After the hurricane season ended last year, I decided it was time to upgrade the wood flooring in my house (people in South Florida don’t usually do major infrastructure renovations during hurricane season, figuring that if the roof blows off, insurance will help pay for upgrades). I called a vendor who had earned my trust and appreciation by rescuing an abandoned master-bathroom project (the previous vendor had demolished the original bathroom, never to be seen again) and had installed a set of fixtures from Hungary — an impressively difficult job, given that the instructions were in Hungarian. I made the fatal mistake of asking: Can you lay wood floors? Naturally, he said yes.
Things were fine while he was doing the easy stuff, but when he got to the steps and the curved walls, he started making it up as he went along. Eventually, the project needed significant rework, and floors needed to be ripped up.
Like many other difficult experiences in life, this immediately put me in mind of ERP. Implementations of enterprise resource planning systems, as anyone who has ever been involved with one knows, are often companies’ most complex IT projects. A CIO who has survived an ERP implementation can wear his wounds proudly for the rest of his life. I’ve been privy to many ERP battles as a board member of an ERP consulting practice, and I’ve heard many ERP war stories in my executive-education teaching.
That all-too-willing contractor who tried and failed to do my flooring has given me a new framework for thinking about vendor selection for ERP implementations, a critical success factor I’ve written about in my research. The lessons can be boiled down to six rules.
Rule 1: Don’t base your vendor choice on personal relationships. Those relationships can cloud your judgment. Objectivity should be the goal. To add further objectivity, use external consultants who will not be part of the ongoing project.
Rule 2: Don’t assume that a vendor with general skills can handle specialized projects. A generalist vendor may not have the requisite skills or access to the proprietary tools, source code, patches, and programmer-interface knowledge that are needed to modify other vendors’ software used in the system architecture — even if he’s smart enough to figure out instructions written in Hungarian.
Rule 2 gives rise to Rule 3: A vendor’s references to specialized solutions need to be subjected to high degrees of due diligence. The project team must satisfy itself of the vendor’s ability to perform the tasks required (legal recourse for poor workmanship or broken SLAs is neither a good solution nor a comfort to shareholders). One way to do this is to visit companies that have been on the receiving end of the vendor’s services. Many companies will spend millions on a software contract but won’t take the time to visit a vendor’s prior customers.
The next few rules apply after the vendor is in place. Rule 4: The formal specification should always be complete before work commences. Beware of methodologies that use prototyping, iteration, and other “specify as you go” models; they can add significant cost, delay the project, and create a design that is an endlessly moving target.
Rule 5: Payment should reward not just time but also the complexity of the task. This requires that a formal specification be complete prior to kickoff. Without such a plan, it’s impossible to predict the degree of complexity and allocate resources appropriately.
Rule 6: Insist that vendors be responsible for all aspects of system integration. It’s vital to ensure that third-party software works as specified, is delivered on time, and is maintainable over the life of the system.
Following those rules would have made my floor job go a lot more smoothly. But I broke them all. I was unduly influenced by my past relationship with the vendor, I assumed that general-contractor skills are transferable to specialized tasks, I didn’t check the contractor’s prior work in wood, I didn’t have a clear idea what the outcome should look like, the payment structure wasn’t weighted toward ensuring a flawless finished product, and I didn’t make sure the vendor was responsible for the totality of the project. Eventually, it all worked out, and I ended up with a very nice new floor. But it’s a good thing I didn’t have shareholders to hold me accountable for all the time and money that was squandered.”
To view the original article, please visit: https://hbr.org
Course Manuals 1-12
Course Manual 1: Collect Supplier Data
It is normal in projects to improve the Accounts Payable process to review the quality of the information contained in the Vendor master record.
There are different situations that can lead to this review: large number of incidents due to inexistent provider, extremely high number of telephone calls due to delayed payment, reclassifications due to error in notes….
Vendor Master Record and theit importance on Accounts Payable Process
One of the first questions we ask is who is responsible for registering new providers and maintaining the vendor master record? The answer is not always the same, even though it normally depends on the size of the company. In large companies it is usually a task shared by Purchasing and Finances/accounts payable (not long ago we spoke about the importance of coordination between these two departments). However, in small and medium sized companies this task is normally carried out by AP.
Vendor Master Record : Quality of information
It is important that the quality of information contained is good as it affects many aspects related to the accounting of invoices:
1. Level of automation of invoice processing. The greater the percentage of automation desired, the great the confidence needed in the existing data. If we want the invoices to flow without human participation we should have complete trust in the veracity/quality of the processed information. We cannot think about accounting invoices automatically if the registers carried out have, for example, incorrectly calculated the invoice due date.
2. Internal Control. A sign of deficiency in the process of provider invoice accounting, is that in the validations carried out, there is a frequent detection of cases where the provider is not created when the invoice is received. In this situation the cost is known when the invoice is received, and in the great majority of occasions there is no way back. In this situation, can the following of internal procedures to select the provider or cost provisioning be guaranteed? Especially serious are the cases in which the provider is catalogued as provider with purchase order, in such a way that all their invoices must be verified by a purchase order issued by the company. How many internal rules have not been complied with so that a provider with purchase order can issue an invoice, and the provider is not even created in the database?
3. Quality of accounting information. In many ERPs connected with the master vendor record, the tax indicators or accounts information exists by defect. If this information is not correct, it is normal that the error is transferred during accounting allocation and from this to the tax declarations. This causes problems when analyzing the accounting information and always ends up in reclassifications. And in the case of tax declarations, it could mean the necessity to present a corrected declaration and even paying some type of fine. There are also situations in which the same provider is created with different codes, which creates problems when analyzing information.
The experience in many different projects show that an efficient management of received invoices has as one of its pillars the correct creation and management of the vendor master record. And the first step in cost savings, even though at first it might not seem so, is that the quality of the master vendor record is reliable.
How can supplier master data management benefit organisations?
If you don’t know who your suppliers are, how can you manage your relationships with them? More importantly, how can you be confident that you’re working with them in the most efficient way and maximising your ROI? Well, the truth is, you can’t – not without sufficient information anyway.
The best way to build an understanding of who your suppliers are is to establish a ‘single version of the truth’ – which basically means improving the way your organisation captures and manages supplier master data (otherwise known as vendor master data).
Of course, as with many transformation projects, often this is easier said than done. Many organisations simply don’t have the time or internal expertise to introduce new ways of recording supplier data, choosing instead to battle on and do things the way they’ve always done them.
While we appreciate the reasons why organisations may choose to do this, there’s little doubt that this approach can only ever be seen as short-termist. In the long-term however, we believe that this results in competitive limitations and greater exposure to supplier risk.
Supplier data management: why businesses resist change
What is the reason for this inertia? Why do organisations resist change despite knowing that improving their supplier data management processes could make their lives easier in so many ways?
Well, some of the major obstacles we’ve often seen include the following:
• Their IT infrastructures are unable to handle the complexities involved with managing supplier relationships and vendor database management
• They have complex master data quality issues, especially when it comes to integrating supplier information from different ERPs
• They often find lots of master data overlapping. This is particularly problematic for larger organisations that store supplier data across many different systems
• A lack of clarity around data governance (e.g. ownership and policies) can cause confusion when it comes to identifying critical supplier attributes
While these issues are undoubtedly complex, organisations shouldn’t simply ignore them and hope they disappear. Instead, they should face them head on and address them. This is where supplier master data management (SMDM) comes into play.
What are the benefits of supplier master data management?
Supplier master data management helps businesses build better relationships with their suppliers and increase productivity by allowing them to:
• Use their time more effectively and focus on finding the right suppliers for their needs
• Record supplier data that is more consistent and of a higher quality from the outset, meaning downstream users can focus on using the data rather than trying to fix it
• Track active suppliers and reduce the amount of time spent collecting and managing information about vendors that are no longer relevant to the organisation
• Standardise their supplier master data across the board and make their vendor master data management processes more efficient as a result
• Make the supplier onboarding process more efficient
The features and benefits offered by a vendor data management solution should be enough to catch the attention of any CPO. Higher-quality supplier data, coupled with more efficient processes, allow procurement teams to operate more effectively and better meet the needs of the wider business.
3 reasons any organization can benefit from high-quality supplier data:
1. One Version of the Truth
Information about your suppliers is likely stored across multiple systems and departments throughout your organization. If employees consistently have to make manual changes in multiple systems, it’s more prone to errors. For example, one department might have named the supplier correctly as The Kraft Heinz Company while the other simply named the supplier Kraft. While each individual department may know the difference, this results in two separate supplier records being created. Enabling a data governance plan around your suppliers will allow you to have a clean and accurate supplier record, creating far smoother business transactions.
2. Ensure Compliance
In today’s technology-driven world, new guidelines are being created all the time. Several regulations from the FDA, EPA, SEC, and more affect companies every day.
Without knowing who your suppliers are and the organizations that they roll up to, your company might be at risk for non-compliance. Having a single, trustworthy view of your supplier record in place facilitates an easier transition when guidelines and regulations change.
3. Improve Supplier Relationships
If your organization is largely dependent on your suppliers, the relationship you have with them is vital to your business. A key component to that relationship lies in the way you manage your information about them and their performance.
Establishing a single, consolidated view of supplier data enables you to work more closely with your suppliers to ensure that their data is correct and in the proper format by applying data governance and customized business workflows. A single supplier record also makes it easier to track performance, manage contracts, or even enable self-serve access for certain types of supplier data. This can reduce costs and drive efficiencies throughout your entire supply chain. Likewise, building a centralized hierarchy of your suppliers and their parent companies allows for a broader view of your network to optimize sourcing, contracting, and communication efforts.
Course Manual 2: Price & Cost Analysis
When referring to businesses, “price” is understood to be the amount of money required to purchase a good or service, whereas “cost” is understood to be the expenditure incurred by a company to bring a good or service to market. The profit that a company makes when an item is sold is the difference between the item’s price and the expenses incurred to bring it to market.
Cost analysis may greatly simplify the process of choosing and managing suppliers, which can be extremely difficult for organizations and cost management. Supplier cost analysis enables organizations to completely assess the financial effects of selecting a particular supplier, the price at which they may offer their goods or services, and the profits they will realize.
To assess whether a supplier is a suitable fit for your business and whether you are getting a good deal from them, it is essential to comprehend their cost structure. Before agreeing to a price, buyers should conduct a cost analysis and ask the following crucial questions of themselves and possible suppliers:
1. What are the business’s direct and indirect costs?
Direct costs are expenses that directly contribute to the creation of the finished good or service, such as basic salary, labor, and materials. Indirect expenses include items like communication and marketing costs, legal fees, and travel expenses that are not directly related to the production of the good. Buyers will have a clearer understanding of their finances and potential profits after accounting for all of these charges, which will make it simpler for them to select a supplier that best matches their budget.
2. What is the price that competitors are paying?
The purchasers will be able to ascertain what is seen as a reasonable price in their industry by finding out what others in the sector are willing to pay for the same services and goods. As a result, they will be better able to decide on and negotiate a price that will keep them in the market while also ensuring that they are not being overcharged. Comparing the costs of various industry suppliers can also help buyers gain a better understanding of the various cost structures of suppliers, making it simpler for them to choose the supplier that best suits their operations and provides the greatest cost savings.
3. Does the supplier understand your industry and your business’s needs?
Buyers need to confirm that the provider has experience working with their specific sector. The dynamics, norms, and trends of the industry, as well as the purchasing preferences of its clients, should be completely understood by suppliers. Just as businesses should have a thorough awareness of how the supplier operates and what their business practices are, they should also understand what a certain business expects from them.
4. What pricing structure best suits the business?
Buyers must weigh the benefits and drawbacks of the suggested pricing structure that the supplier is providing. They should think about the existence of discounts, the possibility of future negotiations, the availability of bundled pricing, and the resolution of any prospective price or monetary disputes between the buyer and the supplier. Buyers should also think about how well the price structure will enable them to collaborate with the supplier to cut waste. The pricing structure’s flexibility and the fluctuating costs of goods are two more crucial factors that should be taken into account.
How does the buyer know that the pricing and terms and conditions that an IT vendor or supplier is proposing are fair, reasonable, and competitive? How does the purchasing organization know the price they continue to charge is just, reasonable, and competitive if they have a long-term supplier? There are various ways to figure this out. By contrasting the supplier’s prices with those of other suppliers and external price benchmarks, the price can be evaluated. Analysis can also be done on the cost components that go into the final cost. Another choice is to evaluate the lifetime costs related to purchasing a good or service in order to determine the total cost of ownership. When analyzing prices, there are additional notions to take into account, such as learning curves and discounts.
How does one decide whether to conduct a price analysis, cost analysis, or total cost analysis? A price analysis should be done when there are numerous prospective providers for a product and there is competition. If there aren’t enough suppliers and there isn’t enough price competition, a cost analysis should be done. All purchased things should undergo a whole cost analysis because it’s crucial to comprehend the full value acquired from a supplier.
Businesses can start forming long-term partnerships that are advantageous to both parties when they can discover cost-efficient suppliers to suit all of their inventory demands.
Vendor evaluation is a standard by which a business assesses a supplier based on the overall quality and effectiveness of their work. Businesses can decide whether a vendor’s price is reasonable by doing a cost analysis that offers information on an item’s entire cost.
Businesses can select new suppliers or group their current vendors based on these factors to give priority to those offering the greatest overall service. Running this study on a regular basis makes sure that the supplier is still able to fulfill the needs of the business for product fulfillment.
The vendor cost analysis data obtained by management enables them to identify which manufacturers provide the greatest goods, services, and prices that help their bottom line.
Cost Analysis vs. Price Analysis
Price and cost evaluations are two quite distinct processes, despite being frequently used interchangeably.
Price Analysis
The price analysis technique, which just concentrates on the market prices of comparable products, is the simpler of the two. This approach’s major objective is to assess the reasonableness of a vendor’s established pricing for a given item.
One can simply conduct a price analysis for an item by:
• examining online shopping sites to discover the typical retail price.
• Getting in touch with various producers to inquire about their pricing policies.
• finding out from market rivals how much they typically charge for a product
These easy steps might assist a business in determining if it should start a partnership with a supplier or look for a seller with lower rates.
Cost Evaluation
Contrarily, cost analysis takes both direct and indirect costs into account when determining a good’s overall worth. This tactic is more complicated because it aims to organize the value into a thorough format. When manufacturers are unable to provide a straight item cost or are creating a unique product that is not yet available on the market, businesses conduct cost studies.
In order to perform a cost analysis, organizations must first look at an item’s direct costs, such as –
• Labor costs
• Materials
• Fringe advantages
• Travel
These are all costs associated with creating and marketing a product, which have an immediate impact on its profit margin.
The business must next take into account the indirect costs, which include:
• Advertising/Marketing
• Legal costs
• Repairs
• Salaries for external labor
• Communication
• Insurance
• Taxes
• Depreciation
• Overhead expenses
Businesses can establish whether a good’s price is appropriate based on its connected expenses by adding up all of the inventory costs associated with it.
Price Analysis
Price analysis is a technique for examining a price and determining if it is fair and reasonable without taking into consideration any particular factors. To assess whether a price is appropriate, it is compared to data such as prices from other suppliers, historical prices, indexes, catalogue pricing, comparable product prices, and prices paid by other consumers.
Methods of Price Analysis
Competition Analysis
It is possible to assess if prices are fair and reasonable by contrasting quotes received for items that were subject to competitive bidding with costs from published lists from various vendors. Competitive bids and posted pricing are those that are reasonably close to one another. The reasonableness of bids that are much less than those of the competitors should be considered. It is important to look at the history of the supplier who offered the significantly cheaper price, as well as the bid. To make sure the bid has all the necessary components and was properly prepared, the supplier must be examined.
Analysis of Previous Prices Paid
If the buying organization has previously bought the same goods, historical prices can be utilized to establish whether the price is appropriate and can be increased or decreased based on inflation and volume. The price can be altered depending on the differences between the goods if a price cannot be found for the precise item but can be for a similar item with commercially available pricing. The price discrepancies must be explained in detail, and the cost of the extras must be compared to the costs of comparable items or assessed by technical specialists. To assess whether a price is fair and reasonable, one can also look at previous prices that other consumers have paid.
Compare Price Sold to Public Sector Contracts
Many products and services are routinely purchased by the federal and provincial governments. Government bids are available for public review, so a supplier’s price can be contrasted with a bid from the public sector. The pricing could be judged to be fair and reasonable using this information. Discounts for purchasing in bulk must be taken into account when comparing prices to government contracts.
In-House Estimate
Engineers and financial analysts on staff can create an internal estimate to assess whether the pricing is fair and reasonable if no other information is available.
Market Price Analysis
Indexes can be used to assess if a price is fair and acceptable or whether you should haggle for a lower price for market-based products, where the price is mostly determined by supply and demand.
Cost Analysis
An analysis of the costs that go into determining the ultimate price is called a cost analysis. Direct and indirect labor, direct and indirect materials, tooling costs, overhead, equipment, general and administrative expenditures, and earnings are just a few examples of the specific elements that might be included here. Analyzing each of these components is a part of cost analysis. The supplier may be asked to explain how the overhead, general, and administrative rates were calculated, and the rates may be compared to those of other suppliers and benchmarks to determine whether they are reasonable. The suggested number of hours might be backed up with data or assessed by the engineers of the buying organization. Quotes can be used to confirm material and equipment costs. Hourly rates can be contrasted with average hourly wages paid to workers and industry rates. The profit rate charged is always adjustable and comparable to profit rates in related businesses.
The Vendor Cost Analysis Process
Similar to this, a vendor cost analysis combines elements from the cost analysis with an overall supplier evaluation to determine whether the provided goods and prices are reasonable. Businesses should evaluate vendors initially based on their-
• Reputation
• Profit levels
• Reliability
• Business model
• Delivery time
• Discounts
• Payment terms
• Quality and cost of goods or services
• Financial stability
• Production capabilities
• Staff experience
To ensure that vendors’ practices or prices have not altered, this review should be carried out on a regular basis.
Businesses compare sellers after utilizing this criterion to reduce their selections to see which ones contribute the most to overall profitability. Companies should closely monitor the costs of the materials needed to work with suppliers, including:
• Overpriced items
• Delivery costs, including expedited shipping
• Storage costs
• Any extra staff
• Damaged goods
• Early invoice payment requests
Using this tactic, management can also get rid of vendors whose goods are costing the company more money than they are worth. By eliminating these wasteful expenses, inventory costs are reduced, which directly raises the company’s profit.
It might be difficult to end a business’s relationship with a vendor. Therefore, before making a final selection, businesses must consider all of the direct and indirect benefits the supplier offers in comparison to their prices.
A company’s procurement process can be made more efficient by finding and forming alliances with trustworthy vendors using the findings of vendor cost studies. Creating a partnership between a manufacturer and distributor has various advantages, including cheaper products, assured high-quality goods, and exclusive offers.
Consistent relationships also boost procurement effectiveness by reducing the amount of time and money spent by the business searching for new suppliers to complete orders. Therefore, carrying out these studies assures that the needs of the company are being satisfied by the most effective and affordable supplier.
Using Automated Systems to Find New Vendors
The most thorough results can be obtained through an automated system when a company needs to identify new suppliers. To obtain the best prices, ordering software can look up nearby markets depending on the goods or providers. On demand, full catalogs are now available, offering the most recent prices to avoid incorrect order computations. In order to reduce procurement expenses, management can then communicate directly with the vendor.
When sellers alter the prices of their products, users are also informed. Every item that is purchased has its price trends and price fluctuation history automatically tracked. Managers may correctly determine which provider gives the greatest price points using this data, cutting down on ordering costs and raising profit margins.
Only the supply chain can determine how effective the buying process is. An extensive way to assess whether a supplier helps or hurts a business’s bottom line is vendor cost analysis. Running this evaluation on a regular basis can help firms save time, money, and resources in the long run.
Course Manual 3: Managing Vendor Risk
Risks Associated With Vendors and Suppliers
It is efficient to outsource the daily minutiae of a time-consuming process or activity to suppliers and providers. However, the business that employs these vendors is still ultimately accountable for what they do, and important stakeholders must ensure that suppliers are adhering to all legal standards that their company is responsible for.
The Consumer Compliance Outlook indicates that there are a number of dangers connected to the vendor-company interaction. Even while these relationships are not always harmful, businesses must still be mindful of these concerns whenever they form a new collaboration.
1. Legal Risk: Over time, compliance requirements have become more complex, and numerous businesses have increased their expenditures to protect themselves from breaking the law. This is especially true in some sectors that are subject to strict regulation, like the financial services sector. It is crucial to make sure that whatever business practices third-party vendors and suppliers employ don’t wind up getting the organization into difficulty. Another problem that could expose a company to legal difficulties is contractual duties.
2. Reputational or Brand Risk: Companies that outsource any aspect of production are effectively entrusting their brand and reputation to another business. If the vendor or supplier violates consumer protection and compliance regulations, or engages in other unethical behavior, it is likely to have an impact on how the public perceives the business. Just keep in mind the problems Apple has experienced with Foxconn, its Taiwanese supplier. Apple’s supply chain is being reevaluated by the Cupertino, California-based electronics giant in order to prevent further occurrences due to the manufacturer’s appalling working conditions.
3. Operational Risk: Finally, engaging third-party contractors entails significant operational risks. Companies may choose to work with a less priced vendor if they are trying to save money. Of course, this could also result in lower-quality work, impeding business success and harming end-user clients.
For instance, if a business employs an accountant who is overworked and overbooked with clients, this may result in forgotten details. The business that employed him may suffer as a result, receiving inaccurate information and possibly making hasty operational decisions.
Supplier and vendor risks typically result from critical relationship management mistakes. The problems of conducting business across time zones and business units, lack of security, uneven testing, and inaccurate cataloging are all flaws that can result in risks becoming significant dangers to a firm, according to KRAA Security.
Evaluating the supplier/client relationship
In order to reduce any potential hazards, it is essential to conduct risk assessments on these external businesses. Due diligence can be used as a tool to nip these unproductive relationships in the bud because prevention is the key.
When working with third-party providers, risk assessment must be viewed as a continual process rather than something that is done once and then ignored. In that aspect, having a vendor risk management plan that is well-documented can assist guarantee that important concerns are being addressed.
“[Companies] that outsource a service or product must adopt appropriate controls, policies and procedures, and oversight to mitigate outsourcing risks effectively,” the Consumer Compliance Outlook report notes. “Institutions should focus on five key areas for effective risk mitigation: vendor selection, vendor contract, vendor management and monitoring, human resource management and contingency planning.”
1. Vendor Selection: The key to preventing problems in the first place is to exercise due diligence. Before agreeing to work with a supplier or vendor, businesses should be sure to thoroughly investigate them, ask pertinent questions, and, if appropriate, get references.
2. Contracts: Another crucial step is figuring out the contract. Companies should have a clear understanding of what they expect from a relationship, and contracts should support those expectations. Contracts also shield the business from potential legal dangers.
3. Vendor Management: Don’t merely let a contract expire once it has been signed. It’s crucial to keep an eye on a business partnership to assure success and further reduce dangers.
4. Human Resources Management: Many management teams are very concerned about operational risk, and it can be distracting when essential functions are changed. Any of these problems may be resolved by HR.
5. Contingency Planning: Sometimes things don’t work out the way we expect them to. Any dangers from outsourcing attempts failing will be reduced with a good backup plan.
Companies can also use a neutral, unbiased template to assess these connections. A numerical scale can be used to objectively assess multiple criteria and connect diverse components. This is crucial for an effective review of these outsourcing initiatives and for figuring out whether they are accomplishing their objectives while reducing risks.
Key Challenges in Effective Vendor Risk Management
Here are a few reasons why businesses frequently struggle to control vendor risk and noncompliance issues, leading to costly fines and penalties:
• Increasingly Complex Vendor Networks
• Unstructured Vendor Monitoring Processes
• Traditional Approach toward Vendor Risk Assessments
• Lack of Policy Awareness and Training
• Heightened Regulatory Pressure
Increasingly Complex Vendor Networks
Nowadays, businesses work with hundreds or even thousands of vendors, each of whom has a network of independent contractors, partners, and agents. Vendor risks can appear anywhere in this extensive network. Vendors may give the necessary business skills, but they frequently do not take final responsibility for the risks and compliance violations regarding the goods or services they provide.
Unstructured Vendor Monitoring Processes
As the vendor base expands, the complexity of the vendor interactions also grows. When businesses use vague, dispersed, and decentralized vendor monitoring solutions that take a lot of time and are hard to scale, monitoring these connections becomes tough. Companies frequently struggle to constantly monitor their vendors because of inadequate personnel, a lack of well-defined metrics, and unstructured business processes.
Traditional Approach toward Vendor Risk Assessments
Organizations frequently develop, disseminate, and maintain vendor surveys using laborious manual technologies like documents or spreadsheets. These solutions only offer a static view of vendor risk and do not provide real-time threat intelligence.
Lack of Policy Awareness and Training
Many businesses do not monitor vendor risks in accordance with their own certifications and policies. This might lead to functional problems. Additionally, if corporate regulations are not clearly conveyed to vendors, there can be a mismatch in expectations between the two sides, which would make it harder for a vendor to guarantee compliance.
Heightened Regulatory Pressure
Regulations and standards must be in line with company policy regarding vendors. If not, businesses risk suffering serious non-compliance problems, fines, and penalties.
Best Practices for Effective IT Vendor Risk Management
Businesses are putting more of an emphasis on improving VRM and addressing the increasing needs of the regulatory environment through best practices like:
• Effective Vendor Selection
• Due Diligence and Continued Oversight
• Vendor Risk Assessment
• Vendor Performance Monitoring
• A Disciplined Vendor Governance Framework
Effective Vendor Selection
For the purpose of identifying and reducing vendor risk, careful preparation and due diligence must be done before a vendor contract is concluded. Organizations can more effectively define controls by comprehending the complexities of a vendor relationship. Depending on the type of vendor, onboarding procedures can be established, and assessments can be planned according to the data gathered. Content gathered from external vendor monitoring sources can be used to further validate vendor information. Vendors can be scheduled for due diligence and routinely assessed based on their degree of regulatory compliance, as well as their competency, promptness, and several other aspects.
Due Diligence and Continued Oversight
Companies can assess the level of risk associated with a specific vendor by conducting adequate due diligence. For maximum effectiveness, businesses should target the vendors that pose the most danger first before moving on to the vendors who pose the least risk. Vendors who pose the greatest risk must have their performance and capacity to adhere to ongoing regulations thoroughly assessed.
Vendor Risk Assessment
A thorough approach for evaluating critical, high, moderate, and low risk vendors through surveys and self-evaluations is the distinguishing feature of a strong vendor governance program. Organizations must be able to create a standardized framework for risk management by establishing controls, setting metrics for assessing future risks, and putting risk-reduction plans into action. An efficient framework for managing risk aids in identifying vendor risk and enables firms to promptly address compliance or risk issues.
Vendor Performance Monitoring
Organizations can keep track of a vendor’s capacity to uphold contractual obligations by routinely monitoring vendor performance. According to the relevant rules, regulations, and standards, vendor KPIs and KRIs should be precisely stated. It is important to identify additional aspects, such as a vendor’s financial standing and capacity to fulfill the organization’s needs. Additionally, businesses should be able to monitor vendor performance in relation to SLAs and find weaknesses in vendor monitoring and reporting procedures.
A Disciplined Vendor Governance Framework
Establishing the organizational hierarchy necessary for vendor governance is crucial because it increases responsibility and transparency across a number of divisions, including supply chain management, risk management, compliance, procurement, and quality. Additionally, it aids in closing any gaps or openings in the organizational structure, enabling effective resolution of any future vendor risk issues.
Technology’s Role in a Strong Vendor Risk Management Program
Technology is a key enabler in firms’ efforts to develop their VRM program in a regulatory environment that is always evolving. Companies may manage complex vendor networks, associated risks, and compliance needs in a streamlined and effective way with the aid of technology. A strong VRM technology platform should be a top priority for any corporation for the following reasons:
• Process Optimization of VRM
• Consolidation of Vendor Information
• Centralized Contract Management
• Mitigation of Risk
• Business Resilience
• Vendor Evaluation and Training
• Analytics and Reporting
Process Optimization of VRM
Businesses may unify and streamline their procedures for controlling and reducing vendor risk thanks to technology. It provides proactive risk management rather than reactive risk management and a future-looking vendor governance program, both of which increase compliance.
Consolidation of Vendor Information
The capacity to map the vendor hierarchy and incorporate vendor data in a consolidated repository is made possible by technology. This improves visibility into vendor profiles and provides a “single source of truth” for vendors.
Centralized Contract Management
Legal and contractual protection is one of the most crucial VRM regulations. With the use of technology, it is possible to combine, structure, and make readily available huge volumes of vendor contracts, documents, SLAs, clauses, and non-compliance penalties. In addition to making vendor onboarding simpler, this aids businesses in avoiding legal issues.
Mitigation of Risk
Companies can track their vendors effectively and efficiently thanks to a centralized technology platform, and comprehensive risk analytics provides the knowledge they need to choose the best group of vendors to work with. Organizations can safeguard themselves from breaking a variety of laws, including the HITECH Act, PCI-DSS, GLBA, HIPAA, and OCC rules.
Business Resilience
With the use of technology, businesses can easily manage and monitor whether their vendors have business continuity plans in place to handle business disruptions as well as stringent security measures to prevent data breaches, cyberattacks, and other unforeseen circumstances.
Vendor Evaluation and Training
Companies can promote continuous development in VRM by routinely evaluating vendors using surveys, assessments, and metrics with clear definitions like KPIs and KRIs. Technology can be useful by enabling a planned and methodical approach to vendor evaluations. Additionally, it can make vendor education on many compliance records and corporate guidelines simpler. In order to achieve regulatory compliance, this makes sure that both the company and its providers are moving in the same direction.
Analytics and Reporting
Effective vendor risk and performance tracking is made possible by trend analysis and reporting systems. By combining data from diverse business processes, related vendor connections, and risk management frameworks, businesses can make better business decisions. The outcomes are then examined in light of all vendor governance programs.
Conclusion
An organization’s approach to VRM can have a substantial impact on its capacity to meet its objectives in a regulatory environment that is becoming more complex. Many firms are required by regulatory agencies to be aware of the dangers posed by their vendors and third parties and to keep up with changes in the law.
In this endeavor, technology is crucial because it enables businesses to link vendor risks to the related laws, controls, internal stakeholders, and suppliers, boosting risk transparency and accountability. Additionally, it makes sure that businesses have access to all the data they require to satisfy the demands of a dynamic regulatory environment. The data flow for vendor risk and compliance is also streamlined, ensuring that the appropriate information reaches the appropriate stakeholders at the appropriate time.
Course Manual 4: Vendor Communication
Successful communication with suppliers
What conduct is expected of you as a “good customer” to your suppliers? We probably don’t remember to ask ourselves that question very often.
Assume for the moment that you have located a reliable supplier who is the ideal size for your business. So far, everything seems OK. You realize during an evaluation that your efforts to deal with this supplier are (yet again) failing, so you begin to blame them. You should remember that there are two sides to every coin at this stage.
Strategic and tactic level communication
1. Regularly meet with suppliers
You can advance the information flow by doing this. You will learn about the latest fashions and technological advancements, and you might even get some free advice tailored to your local surroundings.
2. Ask about their future goals for development
This will provide you with concepts for creating your own services as well as details about potential fresh services that your company would find useful.
3. Make your business model accessible to important suppliers
The provider can learn about your priorities and what is significant to you by doing this. Although they may appear like inconsequential details to the provider, they are essential for your company and the supplier will understand why. If the supplier understands why, they will work harder for you.
4. A roadmap for open development
The provider must also be aware of what and how you plan to develop in the long run. This enables the supplier to provide and create services and technologies that meet your needs.
5. Clearly state your goals
Frequently, vendors are blamed for subpar results. If the definition was ambiguous or wrong, the allegations are unfair.
6. Receive crucial services at the appropriate service levels
If you don’t understand how to attain the proper service levels, it is not the vendor’s problem. If the vendor continues to assist you, it is solely out of kindness.
Operational communication
1. Describe your projects and recent changes.
The provider has plenty of time to plan ahead and set aside the necessary capacity and resources.
2. Use the established routes, techniques, and methodology for communication.
Suppliers use the established channels for a variety of reasons. The process of the supplier is designed around these channels.
3. Meeting and educating the operational staff of the supplier.
Work with them more easily in the future if you get to know them personally.
4. Make changes made internally or by a third party known.
It is preferable to learn about modifications from the consumer than to discover them on your own and add extra time to the settlement process. Sometimes you have to make adjustments quickly, but always remember to let people know when you can.
5. Only prioritize and act quickly to get the source what you need.
The provider must continue to use methods for task prioritization and oversight. Do not rush through each meaningless ticket; instead, consider the overall picture. This will ensure that you receive assistance when you most need it.
Be demanding (including yourself)
1. Take part.
Run the project and any other jobs you have been assigned during the same time frame and with greater piety than you would the supplier’s tasks. You may occasionally find yourself unable to do agreed-upon chores in a timely manner. As soon as you learn about this, let people know.
2. You will gain from the supplier’s success
Consider methods you could make the work your supplier is handling to provide your services simpler. Typically, better outcomes will arise from such cooperation. The supplier is acting on your behalf and not for their own personal benefit.
3. Be honest when you acknowledge a mistake.
If you attempt to hold the supplier accountable for internal or outside errors, they will almost certainly catch on. Bad blood will result from this. We all make errors, as the old adage goes, and in this instance, it holds true more than ever.
4. Consider whether you are a good customer to your providers.
It is a good idea to ask ourselves periodically if we feel ourselves to be good customers. But in order to track its development, this should be done regularly and with the development of meters. Something is a methodical approach to developing this.
5. A nice bell rings out widely.
When you find a reliable supplier, suggest them. The supplier has heard you, and it will probably help you in the future.
6. Pay bills promptly.
Although it is taken for granted, remember that the supplier depends on your business to make a life. This is a must for cooperating.
As you can see above, it is neither a technological nor particularly nebulous issue. Effective two-way communication is key to success. Often, it’s simpler to say than to accomplish.
How To Spot Supplier Risk In Communication
Any organization relies heavily on communication, and supplier relationships are no different. Excellent supplier communication can be likened to the addition of a new department to your business. There are several providers who are quite good at communicating with their clients. You can definitely think of a few vendors right away who have exceptional communication skills. What distinguishes these vendors from one another? First, more effective corporate procedures follow from greater communication. This is demonstrated by the ability to provide clients with prompt and thorough responses. Additionally, effective communicators with suppliers comprehend your company’s goals and how their operations contribute to these goals. As you are aware, communication blunders are significantly less common when a supplier have these qualities.
Unfortunately, some suppliers are not being as open and honest with their clients as they should be. Various risk concerns may be introduced into your supply chain as a result of this breakdown in supplier communication. Consequently, the issue is raised, “How can you identify risk in supplier communication?”
The Details Simply Don’t Align
When dealing with a supplier, you can have a certain contact you deal with regularly. This is the person you contact for new employment or for clarification on any issues. What occurs, though, if your contact gives you false information? For instance, the official documents can state one thing but your contact may have quoted a new job at a different price.
Whether they are intentional or not, these errors hurt your company’s connection with that supplier and slow down commerce. It’s probably time to find a new provider if misaligned details start to crop up frequently.
Non-Responsive to Outreach
You should start to exercise caution if you cannot reach your provider or if you make several attempts to do so but receive no response. Does the supplier not respect your patronage? Do they lack the personnel or the tools necessary to handle incoming contacts and give correct answers quickly? What’s more, how will their slow responses affect your business if something goes wrong on a job or you need to give a client critical information?
In circumstances like this, a delayed response could be quite costly. In general, you can’t place much trust in unreliable suppliers because you never know when you’ll hear from them again.
Won’t Answer Direct Questions
As you are aware, reliable suppliers are essential parts of your business and can be counted on time and time again. You typically have in-depth knowledge of these suppliers and confidence in the data they offer. The same cannot be true, however, of vendors that consistently avoid answering challenging queries or give you responses that don’t directly address your concerns.
These are serious causes for worry, whether they aren’t paying attention during your chats or just don’t know enough about the subject to respond appropriately.
The foundation of enduring partnerships between your business and suppliers is effective communication. These partnerships, particularly with significant suppliers, are frequently collaborative, allowing both your company and that of your supplier to expand at the same time. On the other hand, strained supplier ties pose a risk to your company, but there are ways to protect yourself from supplier risk. You can try to remove these suppliers from your organization or lessen their presence in your supply chain by detecting supplier risk through their communication habits.
Course Manual 5: Vendor Relationship
What is supplier/vendor relationship management?
Procurement and supply chain experts regularly employ the management concept known as supplier relationship management (SRM). There is a rising need to develop precise, quantifiable methods of evaluating each IT provider as supply chains become more complex. SRM aids in identifying how an organization’s suppliers either advance or hinder its operations.
SRM emphasizes efficiency optimization and adding value for all stakeholders as part of a comprehensive supply chain management strategy. It serves as the starting point for cooperation between buyers and suppliers and identifies the most important suppliers to a company. Finding supplier connections that support organizational goals can boost efficiency across the board.
It takes time to develop partnerships that are mutually beneficial, but with honest and efficient communication, suppliers may better grasp the needs that are unique to your business. Because of the valuable relationships that have been built, this knowledge helps to prevent supply chain delays and, if they do, guarantees that troubleshooting is a reasonably straightforward procedure.
What are the benefits of supplier relationship management?
SRM aims to use supplier relationships to boost your company’s value and profitability. When implemented correctly, SRM can boost productivity, lower expenses, and lower costs. Relationship management with suppliers can:
• Mitigates risk
• Optimises performance
• Reduces costs
• Improves administrative efficiencies
• Onboarding efficiency
Risk mitigation
Supplier relationship management increases visibility, which aids in identifying and lowering potential risks. Businesses may follow suppliers using SRM and online inventory management, gathering crucial information that makes it simple to validate supplier information, spot potential hazards, and monitor performance. Impending issues and areas for improvement will also be flagged by performance tracking data.
Performance optimization
Supplier relationship management increases visibility, which aids in identifying and lowering potential risks. Businesses may follow suppliers using SRM and online inventory management, gathering crucial information that makes it simple to validate supplier information, spot potential hazards, and monitor performance. Impending issues and areas for improvement will also be flagged by performance tracking data.
Cost reductions
Increased visibility allows you to spot hidden expenses and take steps to reduce them. You can negotiate better rates, rebates, discounts, delivery charges, and volume thresholds with the support of strong supplier connections. To help you enhance your profit margin, buyers and suppliers can work together to choose contract length, payment terms, supplementary fees, and other incentives.
Greater administrative efficiencies
Software for managing suppliers’ relationships will greatly increase administrative task efficiency. Through digital record-keeping that lowers administrative labor costs, eliminates errors, eliminates data duplication, and prevents the loss of vital supplier information, a consolidated, online repository for all supplier data aids SRM.
Efficient onboarding
It can be expensive and time-consuming to find new suppliers, test products, and negotiate contracts. It is simpler to collect pertinent data, such as details on supplier capacity and capabilities, through optimizing supply chain management techniques through supplier relationship management. Businesses can speed up onboarding procedures and pertinent procurement processes while significantly lowering the costs involved with developing new supplier connections.
SRM assists in locating any current suppliers who have the potential and capacity to satisfy the company’s present and foreseeable needs. ensuring stable prices and a solid supply chain, all of which are essential for the success and sustainability of any business.
What are the types of supplier relationships?
David Pyke examined five different forms of sourcing partnerships in his paper Strategies for Global Sourcing: acquire the market, ongoing connection, partnership, strategic alliance, and backward integration.
Buy the market relationship
This connection is simple and works best with standard buyer-seller transactional agreements for specific products or services. Often, it consists merely of fulfilling a contract, with little to no contact beyond discussing the need and order fulfillment.
This is demonstrated by General Electric’s Trading Process Network (TPN), where parts specifications are electronically uploaded and bids are accepted from prequalified vendors. There is very little face-to-face communication and very little expense with this arrangement.
Ongoing relationship
One supplier is favoured above others and has medium-term contracts under the continuous partnership, which is a publicly (or unofficially) recognized status. Both parties typically share information and get along better in these kinds of supplier partnerships.
Partnership
Partnerships, which typically have lengthier contracts than ongoing and buy-the-market relationships, are characterized by more trust and goal- and information-sharing.
Strategic alliance
In order to accomplish business goals, both parties enter into a long-term partnership in which they pledge to collaborate solely. In comparison to other kinds of supplier relationships, it calls for more cooperation.
Backward integration
Backwards integration entails a company owning the supplier as an integral component of its enterprise. As a result, there is comprehensive information and plan exchange and a unified culture.
What does a supplier relationship manager do?
Establishing and sustaining ties with every company that the organization has a business relationship with is the responsibility of a supplier relationship manager. In order to ensure a comprehensive grasp of the business’ needs and what suppliers are providing, managers also collaborate with key stakeholders inside the company.
The Supplier Relationship Manager’s main duties include locating and classifying important SRM partnerships, giving leadership and knowledge to SRM teams, and overseeing and continuing to govern all supplier relationships.
A comprehensive framework for supplier and partner management must be established and put into effect by SRM managers. The manager evaluates a supplier’s capacity to fulfill contractual obligations, monitors and improves supplier performance during the course of the contract, and tries to lower supply-side risk. identifying issues together and attempting to strengthen and enhance the relationship between supply and demand to improve business outcomes.
What is the supplier relationship process?
Processes for managing supplier relationships make use of tactics to handle connections with important suppliers. attempting to make use of these connections to direct the supply chain, deliver more value, and boost business profitability. The SRM process includes these four crucial steps:
1. Segmentation and classification
2. Supplier strategy development
3. Supplier strategy execution
4. Evaluation, measurement, and feedback
1. Segmentation and classification
Supplier segmentation aids in evaluating suppliers for profitability and risk exposure as well as selecting those most suitable for long-term, strategic partnerships. The nature of the product or service, process integration, knowledge sharing capabilities, and potential supplier risk are some general areas of segmentation.
2. Supplier strategy development
The goals, expectations, and governance structures of the buyer-supplier relationship are informed by the formulation of the supplier strategy. Set aside the internal funds and plans necessary to satisfy business demands, and back them up with useful KPIs and performance indicators that are in line with the achievement of desired business results.
3. Supplier strategy execution
Your roadmap for sourcing includes this. To guarantee that value is produced and objectives are reached, it tracks activities, meetings, and collaborative project implementation. This process is carried out with a few carefully chosen suppliers who are crucial to your company.
4. Evaluation, measurement, and feedback
This last phase involves routinely reviewing and rating supplier performance. This will also include an internal assessment to determine whether the SRM partnerships are providing the anticipated and intended value to all divisions of the purchasing organization.
Businesses should frequently evaluate their relationships with suppliers and concentrate on those that are most advantageous to the company. Those that give businesses the negotiating power to agree to decrease costs in exchange for larger minimum order amounts or a longer contract duration.
Five practical ways to improve supplier relationships
Building partnerships with important suppliers will help offer value and generate higher innovation and value, and this is the goal of a structured SRM strategy. Each supplier relationship should be handled separately, with supplier actions being coordinated with corporate objectives. Here are five useful strategies to help businesses optimize their supplier relationships.
1. Consistent communication
Encourage communication that is clear and consistent. The purchasing firm should partner with its suppliers in communication in order to establish productive, long-term relationships. Provide regular updates on your strategy and business plans to your suppliers so they are aware of their position in assisting, planning for, and profiting from those plans.
By fostering a solid and trustworthy connection between buyers and suppliers, effective communication supports long-term objectives. Building trust is crucial to ensuring that both sides are comfortable exchanging information and cooperating to further mutually agreed-upon objectives.
2. Leverage technology
Business-critical requirements for SRM leaders include delivering quality, sustainability, and increased value in supply chain management. In order to meet these objectives, dynamic technologies are needed to help develop relevant intelligence for continuing analysis and decision-making, as well as to get a deeper understanding of suppliers’ actions.
SRM is typically a component of an integrated, digitized process of business systems and solutions, much like almost all other management strategies that fall under the umbrella of supply chain management. This digital supply chain is a collective digital environment that combines a variety of technologies, tasks, and results to support the creation of robust networks and fruitful collaborations throughout the entire supply chain.
Cost effectiveness and value-added services are important components of an integrated supply chain. Reduced governance expenses and increased overall performance will result from proper system integration and regular monitoring.
3. Focus on sustainability
SRM initiatives should act as a base for creating enduring connections with suppliers who operate responsibly. This entails adopting a methodical approach to evaluating supplier performance while preserving sustainable principles that benefit both people and the environment.
Additionally, suppliers’ ability to deliver on quality without sacrificing sustainability value must be ensured via SRM initiatives. Streamlining supplier evaluations, ranking suppliers based on sustainability initiatives, and routine monitoring of supplier actions, standards, and compliance can all help achieve this.
4. Quality and performance
To meet business-critical KPIs and performance targets, SRM should improve the quality and performance of both the buyer and the supplier. Focus on actions that will have an influence on both the internal KPIs of the organization and the KPIs of your suppliers to develop relevant KPIs.
Performance indicators set the standards for monitoring and assessing suppliers on a regular basis. They might be metrics to measure performance, such as the percentage of on-time delivery and the frequency of receiving high-quality products, or they can be documented product-specific procedures.
Businesses may maintain efficient, metric-based supply chains with the use of supplier scorecards. They provide a comprehensive study of all vendors and rapidly draw attention to the various pricing techniques each one employs. Finding the vendors who provide stable price can remove worries about cost variations and provide pricing stability.
Internal quality and performance metrics should be tracked from SRM managers and procurement officials all the way down to production and retail operations.
5. Risk management
Supply chain risks can be caused by occurrences upstream or downstream in the supply chain and take on a variety of shapes. Supply chain risk resilience can be difficult to assess due to uncontrollable factors like natural disasters, geopolitical crises, and, as the current Covid-19 issue has revealed, worldwide pandemics.
Individual supplier risk, however, is easier to assess and control. Make sure a new supplier has the experience and capacity to suit your needs, is financially solid, and is reputable before working with them. In order to ensure that any crisis that may come may be handled in the best way with the least amount of business disruptions, mitigate risks by reviewing each supplier’s risk profile.
Effective supplier relationship management will save your business time and money, and it can have a significant impact on revenue and profit margins. Your supplier relationship management will be streamlined if you have a solid procedure, adhere to best practices, and use online, digital software solutions.
Additionally, it will give staff members a clear understanding of the purchasing process as well as the knowledge and transparency needed to maximize the value of your suppliers to your company.
Course Manual 6: Vendor Culture
What is supplier/vendor relationship management?
Procurement and supply chain experts regularly employ the management concept known as supplier relationship management (SRM). There is a rising need to develop precise, quantifiable methods of evaluating each IT provider as supply chains become more complex. SRM aids in identifying how an organization’s suppliers either advance or hinder its operations.
SRM emphasizes efficiency optimization and adding value for all stakeholders as part of a comprehensive supply chain management strategy. It serves as the starting point for cooperation between buyers and suppliers and identifies the most important suppliers to a company. Finding supplier connections that support organizational goals can boost efficiency across the board.
It takes time to develop partnerships that are mutually beneficial, but with honest and efficient communication, suppliers may better grasp the needs that are unique to your business. Because of the valuable relationships that have been built, this knowledge helps to prevent supply chain delays and, if they do, guarantees that troubleshooting is a reasonably straightforward procedure.
What are the benefits of supplier relationship management?
SRM aims to use supplier relationships to boost your company’s value and profitability. When implemented correctly, SRM can boost productivity, lower expenses, and lower costs. Relationship management with suppliers can:
• Mitigates risk
• Optimises performance
• Reduces costs
• Improves administrative efficiencies
• Onboarding efficiency
Risk mitigation
Supplier relationship management increases visibility, which aids in identifying and lowering potential risks. Businesses may follow suppliers using SRM and online inventory management, gathering crucial information that makes it simple to validate supplier information, spot potential hazards, and monitor performance. Impending issues and areas for improvement will also be flagged by performance tracking data.
Performance optimization
Supplier relationship management increases visibility, which aids in identifying and lowering potential risks. Businesses may follow suppliers using SRM and online inventory management, gathering crucial information that makes it simple to validate supplier information, spot potential hazards, and monitor performance. Impending issues and areas for improvement will also be flagged by performance tracking data.
Cost reductions
Increased visibility allows you to spot hidden expenses and take steps to reduce them. You can negotiate better rates, rebates, discounts, delivery charges, and volume thresholds with the support of strong supplier connections. To help you enhance your profit margin, buyers and suppliers can work together to choose contract length, payment terms, supplementary fees, and other incentives.
Greater administrative efficiencies
Software for managing suppliers’ relationships will greatly increase administrative task efficiency. Through digital record-keeping that lowers administrative labor costs, eliminates errors, eliminates data duplication, and prevents the loss of vital supplier information, a consolidated, online repository for all supplier data aids SRM.
Efficient onboarding
It can be expensive and time-consuming to find new suppliers, test products, and negotiate contracts. It is simpler to collect pertinent data, such as details on supplier capacity and capabilities, through optimizing supply chain management techniques through supplier relationship management. Businesses can speed up onboarding procedures and pertinent procurement processes while significantly lowering the costs involved with developing new supplier connections.
SRM assists in locating any current suppliers who have the potential and capacity to satisfy the company’s present and foreseeable needs. ensuring stable prices and a solid supply chain, all of which are essential for the success and sustainability of any business.
What are the types of supplier relationships?
David Pyke examined five different forms of sourcing partnerships in his paper Strategies for Global Sourcing: acquire the market, ongoing connection, partnership, strategic alliance, and backward integration.
Buy the market relationship
This connection is simple and works best with standard buyer-seller transactional agreements for specific products or services. Often, it consists merely of fulfilling a contract, with little to no contact beyond discussing the need and order fulfillment.
This is demonstrated by General Electric’s Trading Process Network (TPN), where parts specifications are electronically uploaded and bids are accepted from prequalified vendors. There is very little face-to-face communication and very little expense with this arrangement.
Ongoing relationship
One supplier is favoured above others and has medium-term contracts under the continuous partnership, which is a publicly (or unofficially) recognized status. Both parties typically share information and get along better in these kinds of supplier partnerships.
Partnership
Partnerships, which typically have lengthier contracts than ongoing and buy-the-market relationships, are characterized by more trust and goal- and information-sharing.
Strategic alliance
In order to accomplish business goals, both parties enter into a long-term partnership in which they pledge to collaborate solely. In comparison to other kinds of supplier relationships, it calls for more cooperation.
Backward integration
Backwards integration entails a company owning the supplier as an integral component of its enterprise. As a result, there is comprehensive information and plan exchange and a unified culture.
What does a supplier relationship manager do?
Establishing and sustaining ties with every company that the organization has a business relationship with is the responsibility of a supplier relationship manager. In order to ensure a comprehensive grasp of the business’ needs and what suppliers are providing, managers also collaborate with key stakeholders inside the company.
The Supplier Relationship Manager’s main duties include locating and classifying important SRM partnerships, giving leadership and knowledge to SRM teams, and overseeing and continuing to govern all supplier relationships.
A comprehensive framework for supplier and partner management must be established and put into effect by SRM managers. The manager evaluates a supplier’s capacity to fulfill contractual obligations, monitors and improves supplier performance during the course of the contract, and tries to lower supply-side risk. identifying issues together and attempting to strengthen and enhance the relationship between supply and demand to improve business outcomes.
What is the supplier relationship process?
Processes for managing supplier relationships make use of tactics to handle connections with important suppliers. attempting to make use of these connections to direct the supply chain, deliver more value, and boost business profitability. The SRM process includes these four crucial steps:
5. Segmentation and classification
6. Supplier strategy development
7. Supplier strategy execution
8. Evaluation, measurement, and feedback
1. Segmentation and classification
Supplier segmentation aids in evaluating suppliers for profitability and risk exposure as well as selecting those most suitable for long-term, strategic partnerships. The nature of the product or service, process integration, knowledge sharing capabilities, and potential supplier risk are some general areas of segmentation.
2. Supplier strategy development
The goals, expectations, and governance structures of the buyer-supplier relationship are informed by the formulation of the supplier strategy. Set aside the internal funds and plans necessary to satisfy business demands, and back them up with useful KPIs and performance indicators that are in line with the achievement of desired business results.
3. Supplier strategy execution
Your roadmap for sourcing includes this. To guarantee that value is produced and objectives are reached, it tracks activities, meetings, and collaborative project implementation. This process is carried out with a few carefully chosen suppliers who are crucial to your company.
4. Evaluation, measurement, and feedback
This last phase involves routinely reviewing and rating supplier performance. This will also include an internal assessment to determine whether the SRM partnerships are providing the anticipated and intended value to all divisions of the purchasing organization.
Businesses should frequently evaluate their relationships with suppliers and concentrate on those that are most advantageous to the company. Those that give businesses the negotiating power to agree to decrease costs in exchange for larger minimum order amounts or a longer contract duration.
Five practical ways to improve supplier relationships
Building partnerships with important suppliers will help offer value and generate higher innovation and value, and this is the goal of a structured SRM strategy. Each supplier relationship should be handled separately, with supplier actions being coordinated with corporate objectives. Here are five useful strategies to help businesses optimize their supplier relationships.
1. Consistent communication
Encourage communication that is clear and consistent. The purchasing firm should partner with its suppliers in communication in order to establish productive, long-term relationships. Provide regular updates on your strategy and business plans to your suppliers so they are aware of their position in assisting, planning for, and profiting from those plans.
By fostering a solid and trustworthy connection between buyers and suppliers, effective communication supports long-term objectives. Building trust is crucial to ensuring that both sides are comfortable exchanging information and cooperating to further mutually agreed-upon objectives.
2. Leverage technology
Business-critical requirements for SRM leaders include delivering quality, sustainability, and increased value in supply chain management. In order to meet these objectives, dynamic technologies are needed to help develop relevant intelligence for continuing analysis and decision-making, as well as to get a deeper understanding of suppliers’ actions.
SRM is typically a component of an integrated, digitized process of business systems and solutions, much like almost all other management strategies that fall under the umbrella of supply chain management. This digital supply chain is a collective digital environment that combines a variety of technologies, tasks, and results to support the creation of robust networks and fruitful collaborations throughout the entire supply chain.
Cost effectiveness and value-added services are important components of an integrated supply chain. Reduced governance expenses and increased overall performance will result from proper system integration and regular monitoring.
3. Focus on sustainability
SRM initiatives should act as a base for creating enduring connections with suppliers who operate responsibly. This entails adopting a methodical approach to evaluating supplier performance while preserving sustainable principles that benefit both people and the environment.
Additionally, suppliers’ ability to deliver on quality without sacrificing sustainability value must be ensured via SRM initiatives. Streamlining supplier evaluations, ranking suppliers based on sustainability initiatives, and routine monitoring of supplier actions, standards, and compliance can all help achieve this.
4. Quality and performance
To meet business-critical KPIs and performance targets, SRM should improve the quality and performance of both the buyer and the supplier. Focus on actions that will have an influence on both the internal KPIs of the organization and the KPIs of your suppliers to develop relevant KPIs.
Performance indicators set the standards for monitoring and assessing suppliers on a regular basis. They might be metrics to measure performance, such as the percentage of on-time delivery and the frequency of receiving high-quality products, or they can be documented product-specific procedures.
Businesses may maintain efficient, metric-based supply chains with the use of supplier scorecards. They provide a comprehensive study of all vendors and rapidly draw attention to the various pricing techniques each one employs. Finding the vendors who provide stable price can remove worries about cost variations and provide pricing stability.
Internal quality and performance metrics should be tracked from SRM managers and procurement officials all the way down to production and retail operations.
5. Risk management
Supply chain risks can be caused by occurrences upstream or downstream in the supply chain and take on a variety of shapes. Supply chain risk resilience can be difficult to assess due to uncontrollable factors like natural disasters, geopolitical crises, and, as the current Covid-19 issue has revealed, worldwide pandemics.
Individual supplier risk, however, is easier to assess and control. Make sure a new supplier has the experience and capacity to suit your needs, is financially solid, and is reputable before working with them. In order to ensure that any crisis that may come may be handled in the best way with the least amount of business disruptions, mitigate risks by reviewing each supplier’s risk profile.
Effective supplier relationship management will save your business time and money, and it can have a significant impact on revenue and profit margins. Your supplier relationship management will be streamlined if you have a solid procedure, adhere to best practices, and use online, digital software solutions.
Additionally, it will give staff members a clear understanding of the purchasing process as well as the knowledge and transparency needed to maximize the value of your suppliers to your company.
Course Manual 7: Vendor Stability
Reasons Why Financial Stability of Your IT vendors Matters
The quality and dependability of a company’s suppliers are essentially its cornerstone. If not, how could it produce goods in a timely and efficient manner?
If you don’t spend the time to thoroughly investigate each significant supplier, your business is probably at serious risk. In fact, confirming your suppliers’ financial stability may be the most crucial duty you complete as the new fiscal year gets underway.
There is risk involved with symbiotic supplier partnerships for both parties. Your supply chain’s suppliers need to feel respected and secure, and you need to be certain that you’ll get what you need when you need it.
For industrially oriented businesses to stay up with demand and achieve their own growth objectives, they need reliable IT vendors. If one important piece of software isn’t delivered on time, imagine how many suppliers and IT projects are involved. The potential repercussions of the failure of just one supplier are clear, as is the significance of determining financial soundness.
The fundamental definition of risk generation is relying on one source for a crucial service or component without conducting adequate due diligence. Your suppliers have absolutely no control over the literally thousands of potential events and factors, such as loss of labor. According to 31% of respondents to a recent MIT/PwC study, “supply-chain operations are most sensitive to skill set and experience,” and more than 60% of respondents believe that interruptions in their supply chains have a negative impact on their financial performance.
The risk posed by the very nature of business-supplier interactions can be reduced or even eliminated when firms take the time to thoroughly vet their suppliers, including duties like acquiring and monitoring financial information on key suppliers and keeping a close check on this information. It should be plainly evident as you think about how to effectively manage the risk among your group of suppliers how this procedure and continual commitment can contribute to business success.
While discussing risk reduction is simple, knowing exactly how to safeguard your company is far more crucial. Use these steps as a general outline:
• Assess risk, then do the appropriate research. Depending on how crucial the supplier is to the company’s success, different organizations have differing levels of risk comfort. Consider carefully where your company is most at risk. Next, prioritize your providers according to importance.
• Gather the right data. Once you’ve identified the weakest points in your company, you may start gathering information to assess the supplier’s financial stability. Annual revenue, D&B scores, third-party financial ratings, legal searches (judgments or liens), debarment searches, business continuity plans, financial references, and merger and acquisition activities are all good places to start when gathering information.
• Research and consider third-party “tracking” solutions. Not every company has the internal capabilities required to manage multiple supplier evaluations. Companies can collaborate with organizations to compile, verify, and track over time all necessary supplier information, as well as compliance data (where required) and other prequalification requirements. Don’t be content with spreadsheets and filing cabinets stuffed with paper-based data.
Decide to defend your organization by seeking out, vetting, and developing partnerships with the most trustworthy and financially stable partners in order to reduce the risk and threats that could otherwise be introduced to it. Determining the best strategy for securing your company, clients, and staff is time well spent.
Are your vendors financially stable?
To cut to the chase, choosing a vendor who isn’t financially sound can have a negative impact on your company. You invest time and resources in research, auditing, and negotiations; everything appears to be in order only to learn that the supplier is unable to complete your order. Of course, they don’t disclose any financial difficulties because they might believe that this consumer is their ticket out of the mud.
It can be very challenging to identify financial instability before it becomes a problem, especially since private corporations are not obligated to disclose their financial status to the public way public companies do. Even if a private company decides to share financial accounts with prospective clients during an audit, records might be altered to make them appear better than they actually are. Let’s look at some crucial inquiries to think about when evaluating new (or even current) vendors since they are unquestionably situations you never want to find yourself in.
How do you know if a vendor/supplier is financially stable?
• Checked the supplier’s credit references? First and foremost, a company should be avoided if it declines to furnish credit references. If they do offer references, it’s crucial to check them out. In this case, the adage “trust but verify” is crucial. You should always verify references before assuming anything just because they gave them.
• Does the business finance internal growth? Do they expand? Has new equipment lately been purchased by them? A company’s expansion or growth is usually an indicator that it is financially stable.
• What are the terms of payment? A warning sign that a company lacks the funding to manufacture the product is if they refuse to accept Net 30, and demand payment up front.
• How long have they been in operation? This is not to argue that established
Tips:
• Since financial stability can vary and a company you have worked with for years may face difficulties, evaluating a supplier should be done annually.
• Look into why other businesses selected this supplier; good businesses select good suppliers!
Do your homework to make sure you won’t waste time and money on a supplier who isn’t solid financially. Many user interface manufacturers have come and gone over the past 40 years.
The Consequences of Failing to Review Vendor’s stability
Assessing and tracking supplier risk has actual advantages, while improper risk management has tangible drawbacks that endanger the profitability and sustainability of a company. In the June 2013 issue of the International Journal of Scientific & Engineering Research, the authors of “Managing Supplier Insolvency” stated that “A successful supply chain depends on success of the entities present in the process and smooth flow of the products across the chain,” One supplier’s financial health or company failure may have a significant impact on all the businesses it serves. In its 2012 research, “The New Reality for Managing Supplier Risk,” Deloitte listed some of the risks related to supplier monitoring – or lack thereof.
A successful supply chain depends on the performance of the participants in the process and the efficient movement of goods along the chain.
Financial Loss
The value of the businesses that a supplier works with can also be harmed by financial risk, as indicated in the KPMG report “Managing Supplier Failure Risk.” The long-term business plans of a big supplier’s partners may be abruptly put on hold or significantly changed. Project plans might need to be delayed while a new supplier is sought after, estimates might need to be revised, and project possibilities might be lost. All of these things could result in significant financial loss for a company. There are more ways besides those to incur extra fees. External analyst downgrades, “loss of customer goodwill,” additional resource expenses paid when a supplier fails, and missed revenue opportunities are a few examples of how value is lost, according to KPMG.
Violated Contracts and Damaged Credit
Contractual obligations with other businesses may be broken by these companies if a supplier goes out of business and leaves its partners unable to fulfill deadlines or finish projects. A corporation runs the danger of losing money and damaging its credit by failing to evaluate the financial stability of a supplier and take the necessary measures. Businesses should not only be aware of the consequences of not fulfilling these responsibilities, but also take proactive steps to lower the risk by evaluating the financial viability of suppliers before entering into a partnership.
Reputational Impact
Positive feedback and recommendations assist businesses in obtaining new contracts and project wins. However, when a company neglects to proactively evaluate a supplier’s financial viability, even strong reputations can be at risk. When a supplier fails to produce as promised, this has a negative impact on its partners, who may be unable to fulfill their own commitments and lose the faith of their clients as a result.
The reputation of a company might suffer from supplier threats in addition to financial difficulties. Pre-qualifying prospective suppliers for other liabilities, such as safety or insurance risk, that could harm a company’s reputation can be done with the aid of a third-party service.
Course Manual 8: Vendor Viability
Which Measurements Belong in a Supplier Capability Assessment?
Depending on your company’s current needs and long-term goals, the components that are reviewed in a supplier capacity assessment may change slightly. Transparency is ensured by knowing the measurements you’ll examine. Suppliers are in need of and interested in knowing the criteria used in one of these tests.
A broad range of subjects that might be examined in an evaluation include:
• Cost
• Quality
• Scalability
• Delivery speed
• Inventory turnover
• Response time to queries
You should choose pertinent metrics to track within those areas. An example of a quality objective based on faults per million is six sigma. When evaluating delivery efficiency, you might count how many deliveries made by a supplier in a particular month were late.
Create a mechanism that allows the supplier to see how they compare as well. You might, for instance, provide numerical scores and ranges for each category. They demonstrate how things evolve over time, whether for the better or worse, which is advantageous to all parties concerned.
How Should You Discuss Evaluation Results With Suppliers?
The manner in which you discuss evaluation results with suppliers depends on a number of criteria. What level of severity are the concerns found? Is this the first time the business presented significant risks? Do the issues only affect one department or do they affect the entire company?
Your immediate reaction could be to concentrate on every failure that has been noted. Try to adopt a more balanced stance by identifying the areas and methods in which a provider excels. When praise is due, be sure to mention what really impressed you. Make sure the timelines for when you anticipate to see improvements are made clear in the discussion. Indicate what might or will occur if a corporation doesn’t take timely corrective action.
What Are the Consequences of Not Doing Supplier Capability Assessments?
These checks might not be conducted if the accountable parties are overly eager, stressed for time, or unwilling to spend the necessary funds on evaluating vendors. But doing that could be much more expensive and harmful than running a supplier check.
Imagine a scenario in which a supplier wooed you with lofty claims and flowery language but then proved unable to live up to expectations a few months after you signed a one-year contract. Those situations might have a negative impact on your business’s earnings while also raising client unhappiness.
If a supplier is unable to handle rapid changes that adversely affect its capacity to source components or raw materials, other catastrophes may ensue. The resulting delays can seriously interfere with a schedule or put an end to your company’s expansion plans.
Do You See Areas for Self-Improvement?
After reading the aforementioned sections, it might be clear that not just suppliers need to adapt. You can have issues to deal with as well. Despite having selected and worked with supply chain partners for more than ten years, it’s possible that you have never conducted a supplier assessment before. Perhaps you’ve struggled to develop a reliable system for determining how close businesses are to the standard of excellence you desire.
Don’t let whatever shortcomings you may find demoralize you. The first step in figuring out how to enhance your strategy is realizing they exist. The resulting improvements may be advantageous to both your business and its supply chain partners.
Viability dimensions
There are numerous aspects of supplier viability that can be evaluated:
1. Financial: the wherewithal to stay in business
2. Operational: the capacity to provide the level and quality of supply required
3. Structural: a planned or involuntary organisational transformation
4. Technical infrastructure: the supporting technologies used to conduct operations
5. Supply chain: the supplier’s own supply base.
A supplier’s viability is graded overall based on the total of its viability issues across all dimensions.
The importance of supplier viability
To be able to serve its market or clients, a company may require a variety of things, such as:
1. Equipment
2. intangible assets
3. Premises
4. Expertise
5. Funding
6. working group
The organization is likely to get any or all of these products from outside sources.
The effects of a supplier’s stoppage or cessation of providing necessary goods or services, or a drop in quality, can be anything from minor inconveniences to disastrous for the organization.
Due to quantities of stock on hand or the ease of finding substitute supplies or providers, such supply challenges may be manageable for the organization in the short term. The danger comes from the possibility of supply disruptions that are recurring, prolonged, or permanent.
The sustainability of the supplier may therefore depend on whether the supply problem is specific to the organization for some reason or if it is a sign of a more widespread ailment impacting both the supplier and many of its clients.
Situations that can affect supplier viability
A provider could come across a variety of circumstances that might raise questions about its viability. Even while the occurrence of a handful of these circumstances may not necessarily be cause for action, it does encourage vigilance. But if the number increased, it would be wise to look into the latent danger more thoroughly.
Examples of circumstances a provider might come across or go through that could endanger its viability include:
Bankruptcy. A company is insolvent if its earnings are insufficient to cover its obligations. In such circumstances, the company will shut down and stop offering any goods or services. In other instances, it will carry on while collaborating with administrators to restructure the firm and make it viable once more. Usually, the courts make the decision regarding which alternative will be used.
Legal action. For a variety of reasons, including fraud, corruption, negligence, and unlawful acts, people, organizations, and governmental entities may bring legal action against a provider. The provider may be threatened with insolvency if a big enough sum of damages is awarded against it.
Local or global credit crunch. A supplier may postpone key expenditures and implement cost-cutting measures as a survival tactic in generally challenging economic circumstances. With a danger of continuous loss of capability and/or capacity, maybe beyond the point of recovery, these actions could render it potentially uncompetitive.
Exceptional growth. If the supplier is unable to secure funding or promptly hire and educate additional workers, rapid expansion could result in poor service delivery. A negative outcome may also result from changes to the supplier’s leadership lineup, priorities, service, and support alternatives.
Low market share. A supplier could be unkind to both its consumers and own suppliers. It might disregard established norms and oppose new ones. It might decline to admit any wrongdoing or dishonest behavior. Any of these activities could lead to its suppliers refusing to work with it, which would impair its ability to supply any remaining customers.
Takeover or merger. When two suppliers come together, there will inevitably be a rationalization of both the available goods and services as well as the labor force required to create and maintain them, whether over time or right away. This may have an impact on the variety, cost, and quality of goods and services that the joined organizations offer.
Organisational restructuring. As the focus shifts to the new order of business, business unit acquisition and mergers, increased centralization, and entry into new markets may have an effect akin to takeover or high growth.
Technology failure. Situations that endanger the viability of the provider’s technology infrastructure can arise from any lack or unwillingness on the part of the supplier to protect and defend it appropriately and proactively. Customers’ sensitive and private data is particularly vulnerable to corruption, loss of accessibility, and theft and disclosure. Users and system administrators may be prohibited from accessing their systems.
Performance failure. It could be deemed too risky to take on if the supplier consistently fails to reach established service delivery targets because of its own actions or inactions. If negotiations drag on, the organization may have no choice except to terminate the contract.
Supply chain issues. The ability of a supplier to provide the organization with goods and services might be impacted by external supply chain problems that are either more widespread or limited to the source. Natural disasters, geopolitical or economic events, the ripple effects of supplier failures earlier in the supply chain, and other factors may be to blame for such problems. The ability of the impacted provider to find goods from alternative vendors at prices and lead times that are agreeable to both it and its clients will determine whether or not it can remain in business.
Supplier viability warning signs
What kinds of indicators should you be looking for that may be indicative of future viability concerns if it is your responsibility to analyze the viability of your company’s suppliers and minimize supplier risk?
There are a few prevalent, comparatively simple to see indicators of danger to supplier viability, such as:
1. For timely payment, further discounts are provided.
2. the appointment of a manager
3. filing for bankruptcy
4. Delays in the creation of new goods and services
5. delivery that is late
6. declining credit score
7. financial reliance on a small number of key clients, particularly the government
8. failures of highly visible technology or legal action
9. Customers are primarily found in struggling sectors.
10. Several key links in the supply chain are in struggling economies.
11. reduction in quality
12. major emphasis on saving money
13. Significant expansion or organizational change
14. Lack of raw materials harming the industry
15. Revisions to earnings and profit projections
16. target of a rumored acquisition
17. ongoing negative publicity
18. Performing poorly subsidiaries
19. Insufficient financial ratios
20. Orders require a down payment.
When to assess supplier viability
There are numerous circumstances in which a supplier’s viability should be evaluated:
1. as a crucial step in the selection process for new potential suppliers of essential goods and services
2. If a vital supplier’s viability hasn’t been evaluated yet or within the past 12 months, as soon as it’s possible.
3. On being informed of any circumstance that might jeopardize the viability of a crucial supplier
4. Prior to any present suppliers’ status being upgraded to critical
5. Regularly, as established on a case-by-case basis, during the lifetime of the appropriate contract with a critical supplier.
6. is a crucial step in the procedure for renewing contracts for essential goods and services.
The objective of the game is to anticipate problems. This not only makes it possible to establish strategies to reduce particular risks, but it also lessens the likelihood that people would react hastily to unexpected situations when cooler heads should prevail.
How to assess supplier viability
It is possible to develop a generalized approach to supplier viability assessment to address the numerous circumstances that might apply at the time. High-level operations could involve:
1. Bring together the contract’s stakeholders and make a list of all the present problems.
2. Determine the extent of the assessment and whether any outside expertise is needed.
3. With the supplier, go over the assessment and decide on the information that is required.
4. Obtain all necessary data from the company, the supplier, and any outside sources.
5. Engage all necessary internal and outside specialists to help with the assessment
6. Review all the information received, then list and rank all concerns.
7. Send the supplier the specifics of any significant issues for assessment.
8. Request from the provider a detailed action plan and timetable for resolving the issues
9. Examine the supplier plan and gauge how well it resolves issues with viability.
10. Talk to the provider about any issues you have with the plan and try to come to an agreement.
11. Create a strategy to address any issues with the supplier’s plan that may still exist.
12. Prepare and approve any contract modifications required to more fully address supplier viability issues.
13. Update the contract, the related paperwork, and the procedures as necessary.
The evaluation effort should be in line with the organization’s risk of the supplier’s non-viability.
To allow for the recording of the necessary information regarding and the conclusion of the viability assessment, a free template is supplied.
What does financially viable mean?
A company is said to be financially viable if it:
1. earning enough money to pay off business debts and give the owner of the business a return, or
2. Despite not being lucrative, the business has enough cash to last until it is.
Guidance for financial viability assessments
There are several techniques available to assist in identifying signs of financial stress in a supplier.
These can include examining the supplier’s financial results and credit reports that have been publicly filed, having an open conversation with the supplier, obtaining anecdotal evidence from the supplier’s other clients and pertinent industry associations, and gathering perceptions of unusual supplier behavior as reported by staff members who work with the supplier.
The primary goal of the financial viability check is to ascertain whether the potential supplier is currently solvent and likely to stay that way, all other things being equal. If the supplier is a division or subsidiary of a much larger company, with its financial information included in the parent’s reported results, the situation becomes a little more complicated.
It is obvious that any assessment only considers current circumstances. These are subject to fast change and can have either a good or negative impact on a supplier’s financial viability.
Public corporations are required to disclose a lot of financial information. The following well-known ratios that are important indicators of financial viability can be computed using this data:
1. Profitability: a supplier’s capacity to cover all overhead costs is determined by how effectively it uses its resources and manages its costs to provide an acceptable rate of return.
2. Liquidity ratios: the ability of the cash source to meet short-term obligations, grow, and be available to service debt.
3. Activity ratios: Measures of how effectively a supplier uses resources include their capacity to control inventory, supplier payments, and customer collections.
Be aware that private businesses are exempt from these reporting requirements, and that obtaining the necessary data can be challenging. It is probable to directly approach such suppliers for reassurance over their financial stability, usually under tight non-disclosure terms.
Also keep in mind that new suppliers might not have enough financial experience to enable for a viability assessment. In these circumstances, the supplier might consent to share information about their business plans, the status of those plans in comparison to those plans, bank statements to demonstrate liquidity, specifics about how and by whom they are supported, and sometimes financial statements of their backers.
The required ratios are automatically generated by the free Excel template. It is likely that internal or external financial experts will be needed to assist with benchmarking these ratios against averages from the supplier’s industry and providing an explanation of the ratios in terms of a viability reading.
Considerations for mitigating supplier viability risk
The organization must take into account a number of considerations when deciding how to respond to a subpar viability assessment for one of its crucial suppliers, including:
1. The risk associated with the supplier’s actual or potential viability
2. Whether the non-causes viability’s are specific to the supplier or widespread in the market
3. What the supplier intends to do in response to the circumstance
4. The period of time when the negative effects of non-viability are most likely to manifest themselves
5. Whether or not the supplier views the company as a highly valued customer
6. The number of orders in any backlog and the estimated time to delivery
7. the adaptability of delivery schedules for unfulfilled orders
8. Whether or not the supplier has proven feasible alternatives that are respectable
9. The viability of switching suppliers mid-project for extremely difficult, valuable, and necessary work
10. The benefits of proactively contacting different suppliers and distributing the orders
11. The general state of the economy and politics, whether local, regional, or global
12. The breadth of your rights under the supplier contract
These considerations should be taken into account in order to determine what the organization might, could, should, and should not do in order to reduce the risks of the supplier’s non-viability, as well as how quickly and how much it should cost to do so.
Even while the supplier truly doesn’t want to lose any clients, much less cease operations, ensuring its own survival is still the organization’s primary goal.
To boost your own viability, if doing so requires cutting ties with a provider, so be it. Remember that while taking such action may put further strain on a supplier’s viability, it’s strictly business and not personal.
Summary
It can be challenging to draw in and keep consumers in the competitive business world of today. The last thing you need is to encounter problems with your suppliers and be unable to provide for your customers. If the affected suppliers are crucial to your company’s performance, things could get out of hand very quickly.
Understanding the underlying reasons for supply problems that affect important suppliers opens new options for reducing the risk to your company.
These underlying factors might arise in both expected and unforeseen circumstances. To an undetermined extent, they may be fixable or unfixable, and controllable or uncontrollable. Planning ahead is strongly recommended, and quick action is essential.
Increased awareness of crucial suppliers’ actions and motivations is the main element in this situation. For that visibility, a lot of data from many sources might be required. Once acquired, all that is required to offer the most recent information is routine updating.
The establishment of strong ties with the important suppliers ought to be a top concern. It’s not only common sense; it can also offer a concrete advantage by acting as an early warning system for problems that could have negative ripple consequences.
Failure to establish these connections is like to shooting oneself in the foot: you can become permanently disabled and not receive much sympathy because you ought to have taken more precautions.
Course Manual 9: Vendor Quality
What is Supplier Quality Management (SQM)?
As was before said, supplier quality management (SQM) is the process of keeping track of a supplier’s capacity to satisfy the needs of the client. SQM evaluates the efficiency of the supply chain in a proactive and cooperative manner.
Companies must accomplish a few objectives in order to master supplier quality management. The first step is to build a strong rapport with suppliers across your whole supply chain. The next step is to create a structured supplier quality management process with trackable success metrics for quality and compliance. Once your measurements and process are perfect, you can begin watching the data to uncover supplier insights. You can determine how well suppliers are serving your customers’ needs throughout your whole supply chain by using the trends you discover in these insights.
Contrary to popular belief, supplier quality management is more dependent on relationships with suppliers. Strong trust and the capacity to exchange knowledge and resources across extensive supply chains are necessary for the establishment of an efficient supplier management process. Understanding each other’s roles in the process is another prerequisite for effective collaboration.
What are the Benefits of Supplier Quality Management?
It’s simple to believe that supplier quality management just has an impact on the final product’s or service’s quality. That is not true. Yes, the quality of your goods may be made or broken by how you manage your suppliers’ quality, but this ultimately has an impact on how people perceive, value, and succeed as a brand. The following are some of the main advantages of putting into practice a supplier quality management strategy:
Minimize risk
Increasing the length of your supply chains involves some risk. You could always run into problems with compliance, quality, safety, etc. By offering you total insight across your supply chain, effective supplier quality management helps to reduce some of the risks. This enables you to identify each danger before it becomes an expensive issue.
Strengthen supplier relationships
You need to put your nose to the grindstone in order to launch a business. Whether you’re attempting to cut costs, simplify contract management, or protect the reputation of your brand, supplier quality management may help you get over all the obstacles standing in the way of long-term profitability.
This is so that complicated processes like supplier prequalification, audits, vendor management, insurance monitoring, and analytics can be made simpler.
Make better procurement decisions
Through efficient communication, review, selection, and monitoring, supplier quality management relieves your chief procurement officers of some of the burden associated with making purchases and speeds up the procurement process. Less lead time and higher-quality purchasing selections are the results of more data.
Stay compliant
Compliance is complicated when working with numerous providers. The easier it is to stay in compliance, the more proactive you are when it comes to keeping an eye out for any disruptions.
Maintain safe supply chain
You undoubtedly keep your company’s health and safety in mind, but have you thought about your suppliers’ health and safety? Every stage of the supply chain, including contractor prequalification, document management, personnel qualification and training, and insurance verification, is subject to supplier quality management, which tracks health and safety requirements.
Uphold a brand reputation of quality
Recalls and lawsuits making press headlines are the last thing your brand needs. You can establish a reputation for quality throughout your supply chains and a brand that customers will trust by practicing strong supplier quality management. In the long run, this can increase total profitability and shareholder value. In fact, it has been demonstrated that a 5 percent increase in reputation strength results in a market capitalization increase of 2.2 percent for the FTSE 100 and 2.5 percent for the typical S&P 500 business.
Cultivate a loyal, satisfied customer base
SQM enables businesses to provide clients with products or services of higher caliber. Even speedier delivery of goods and services to customers is possible. Customers will return for more when they experience quality. Because they adore the product, 55,3 percent of customers stick with a brand. You can ultimately boost customer loyalty and lifetime value by enhancing quality through supplier quality management processes.
The Supplier Quality Management System
The management of suppliers is a multi-step procedure. To complete the system’s multiple steps correctly, cooperation, communication, and software tools are needed. You can adapt this procedure based on the workflows at your firm by using the basic architecture provided below. There are 5 steps in the process:
Approval – Establishing procedures for obtaining supplier approval is the first step in creating a strong supplier quality management system. Depending on the level of risk, these steps will be more or less rigorous. Make a comprehensive list of all the procedures required for supplier approval. All roles and duties should be included in the list; doing so will simplify the processes when numerous departments are involved. A checklist that evaluates each vendor’s safety and quality systems is also necessary.
Audits – Regular auditing enables you to maintain control over supplier quality. Regular supplier audits make sure that your supplier’s procedures remain compliant with the demands of the buying firm. Smaller businesses typically choose third-party audits, however enterprise-level businesses can do second-party audits as well. The distinction? An external audit of a provider is carried out by a client or other organization with whom you have contracted. Audit organizations carry out third-party audits, avoiding any potential conflicts of interest. Remote audits can be carried out by enterprise-level and small firms alike with the proper supplier management software. With the aid of these tools, suppliers may electronically collaborate, communicate, and sign off on documents.
Incoming inspections – Conducting incoming inspections is the next phase in the supplier quality management procedure. Another strategy for assessing supplier quality is inspections. In this step, a set of specifications are used to evaluate the supplier’s IT products or services for compliance.
Ongoing communication – A key component of preserving healthy supplier relationships is communication. Make updating your supply chain a priority. By maintaining open lines of communication, you’ll probably manage to stop a good deal of prospective problems in their tracks. Be sure to communicate your expectations effectively, keep vendors informed of requirements, and remain on top of any potential hiccups.
Non-conformance & CAPAs – The last step is one you ideally won’t have to take very often. In order to prevent a recurrence of the problem, you must file the proper non-conforming materials reports when you discover raw materials that don’t adhere to the standards for product quality.
How is Supplier Quality Management Measured?
Organizations require a consistent set of measures to assess the performance of their suppliers in order to gauge supplier quality management. These metrics can be used by businesses to include information on a supplier scorecard. The business will then assess a supplier’s dependability using that scorecard.
The finest scorecards make use of tech to make them constantly accessible to both the firm and the provider. Maintaining an open line of communication while evaluating supplier performance is crucial for a successful partnership. A dynamic scorecard is always accessible and up to date when stored in the cloud using software.
You could utilize a variety of measures on your supplier scorecard, but some typical ones are as follows:
• Quality
• On-time delivery rate
• Acknowledgment rate
• Responsiveness
The control of your suppliers’ quality will be simple if you pick the correct ones early on. The next time you choose providers, keep these 6 things in mind to position yourself and your business for success.
Cost of quality – Cost will undoubtedly be one of your initial considerations during your search, but the cost of excellence goes a little farther. Expense of quality essentially quantifies the cost of producing a good. The price of subpar quality and the price of superior quality are both included in this section. While the cost of good quality relates to preventative efforts, the cost of bad quality includes resources left over from production (like supplier quality management software, for example).
Overall service effectiveness – The availability, effectiveness, and quality of an IT vendor’s services are measured to determine how well they operate overall. This indicator displays when, how frequently, and how frequently the assets you require will match your quality standards.
Services in compliance percentage – The degree to which your potential provider complies with applicable laws and regulations is shown by their compliance rate. The supplier will have less risk if this figure is higher.
On-time shipments – Customers evaluate quality by considering the entire purchasing process, not just the tangible goods. If your products and services are frequently unavailable, customers may become dissatisfied and look elsewhere. The findings of this Walden University study demonstrate that frequent stockouts reduced consumers’ loyalty to brands and merchants and even led some consumers to give up on brands altogether. Customer happiness and loyalty are enhanced by regular, on-time service delivery, thus this should unquestionably be a prerequisite for your next supplier.
New product introduction – The proportion of new goods that successfully meet volume, quality, and timetable objectives is known as the new product introduction rate. Money is time. You must remain relevant if you want to generate revenue. You need a supplier who can adjust to your particular new product introduction and material needs in order to execute this successfully.
Supplier diversity – Focusing on diversity and responsibility within your supply base is a highly effective risk mitigation strategy and a wonderful way to gauge supplier satisfaction. Human rights, environmental concerns, and health and safety procedures are examples of responsible sourcing elements that should be tracked to defend against supply base risks and increase the variety of your supplier base.
Supplier Quality Management Best Practices
To create and maintain a best-in-class SQM program, a number of behaviors must be embraced. You may be sure that by taking these few steps, you will enhance your sourcing procedures and make the most of your suppliers.
Measure the cost of poor supplier quality
In the end, you are in charge of ensuring the quality of your products and services. You must therefore routinely check the caliber of your suppliers and raw materials. Accidents can avoid becoming costly errors if you can identify them early and fix them before they happen again on a wider scale.
Calculating the costs associated with mistakes, delays, and similar occurrences is the process of estimating the cost of poor supplier quality. By carefully examining the cost of poor quality, you can modify your connections with suppliers and reduce risk in the future.
Cross-examine supplier risk management with quality audits
It might be challenging to frequently audit all of your vendors if you are managing a large number of them. To overcome this obstacle, identify your highest-risk suppliers by comparing your supplier risk management with your quality audits. Make auditing these more frequently a priority.
Bump up your quality standards
Contacting your suppliers frequently is the greatest method to improve product quality control. The more information you have, the better prepared you will be to weed out dangerous (or simply useless) vendors.
Standardize your metrics
You may measure supplier performance precisely and consistently by using a set of key performance indicators. It’s crucial to monitor performance using the same key performance indicators to determine whether supplier performance is improving or declining. The metrics can even aid suppliers in making course corrections.
Use the SCAR procedure
When it comes to fixing compliance problems, immediate and effective action is required. Establishing a supplier corrective action request (SCAR) procedure is the most efficient approach to address compliance problems. With a remedial method in place, you can move swiftly and give suppliers the instructions they require to address the problem as soon as feasible. The outcome will be better if you don’t have to rush to create an action plan.
Conclusion
It might be challenging to gauge a vendor’s product or service quality while conducting an IT vendor evaluation. Using a system like supplier quality management might help you keep your presence known. The SQM framework offers the options for cooperation and assistance businesses need to reduce risk and find high-quality goods.
By automating procedures, combining data, and gaining end-to-end insight with your supplier management, firms may further magnify the advantages of SQM.
Course Manual 10: Vendor Performance
Managing poor supplier performance
Perhaps you anticipated bad supplier performance from the beginning, but you moved forward anyhow because you had no other option. Or perhaps you simply had an odd sense that you can only now, in hindsight, describe as distrust.
Perhaps there was nothing anyone could have done because circumstances can change and be beyond your control. All that’s left of your youthful optimism is a dim recollection, and you now only have a pessimistic outlook on the world.
You’ve been let down by subpar supplier performance.
What follows then? Let’s start by returning to the beginning.
A contract is typically set up between a company and a vendor to handle an issue that has been recognized, to take advantage of a prospective opportunity, or occasionally both.
Both parties anticipate that the contract will be effective in resolving issues and/or seizing opportunities, with good performance on both sides in terms of adherence to commitments and attaining value for money.
When appropriate, a contract should outline pertinent, all-parties-agreed performance standards. These factors serve as the foundation for judging the contract’s long-term success or failure.
Although any performance that falls short of the agreed-upon standard is undesirable, expecting perfection and refusing to allow for shortcomings would be foolish.
The agreed-upon performance requirements should always be accompanied by performance levels that are acceptable and unacceptable, as well as any related repercussions. A key component of supplier management is this.
The process of carrying out a task or function, such as the supplier providing specific services to the organization, can be assisted by supplier performance management software. It can also serve as an indicator of how well the task or function was carried out, such as the degree of adherence to a set delivery schedule.
A crucial risk reduction strategy is monitoring performance against supplier management KPIs. The impact on supplier performance might be enormous when bad things happen swiftly but silently. Performing poorly might happen gradually or quickly. The effects can be minor and manageable or devastating and irreversible.
We will provide a thorough strategy for dealing with subpar performance through supplier performance management in this course manual, covering:
1. How is supplier performance measured?
2. What is poor supplier performance?
3. What causes or contributes to poor supplier performance?
4. Implications of poor supplier performance
5. Detecting poor supplier performance
6. Understanding why poor supplier performance occurred
7. Accepting responsibility for poor supplier performance
8. The impossibility of addressing it
9. How to address poor supplier performance
10. Failing to address it
1. How is supplier performance measured?
It is very always necessary to deliver the goods or services agreed upon with certain goals in mind, such as:
• By a certain day and time
• For a certain cost
• According to a certain criterion or standard
• In a particular quantity
• Of a particular caliber
• In accordance with a number of regulations
• To a certain extent, user pleasure
Time, cost, quality, and opinion measurements are common categories for these objectives.
Different degrees of compliance with the established delivery targets frequently serve as indicators of supplier performance. The minimum intended performance level may be expected immediately or following a transition-in time during which the supplier creates and ramps-up capability or completes some sort of phased roll-out program, depending on the products or services to be supplied.
Poor supplier performance has several different definitions. Generally speaking, it refers to anything having to do with a service delivery failure of some kind that has, or could have, an unacceptable negative impact on the organization.
Poor performance is frequently measured specifically as achieving a level of performance below the minimum desired, with the severity of the shortfall growing with the gap between the actual and desired performance level. Early on in your supplier relationships, risk analysis can be a crucial sign of whether subpar performance is expected.
As generic performance criteria, additional factors that are more indirect or subjective may also be used, such as:
• Costs are decreasing.
• Trending up: either quality or speed
• Reasonable response times for services
• An efficient working arrangement
• Delivery of innovation or ongoing improvement
• Adaptability to shifting organizational requirements and conditions
• Honesty in identifying organizational barriers to supplier performance
2. What is poor supplier performance?
Poor supplier performance must be defined in the contract such that it is clear to all parties when it happens and is essentially unchallengeable.
The definition could list numerous performance target levels that, taken separately or in combination, represent an unsatisfactory situation either right away or over the course of a certain amount of time.
It might be conceivable to set up a process for raising delivery and other supplier performance goals at specific points over the contract’s life with advance planning during the initial contract construction. This ought to hold true for any definition of subpar performance.
The mechanism may be based on commitments to innovation or continuous improvement, or it may simply be based on the expectation that the supplier’s operations would advance over time as it gains expertise in providing the organization with the goods and services it needs.
In order for supplier performance management to be successful, there must be consequences that take into account intent. This is important to promote proper conduct while providing goods and services, to support the idea that individuals can be trusted to fulfill their commitments, and to serve as a reminder of the relationship between actions (or inactions) and results.
3. What causes poor supplier performance?
Poor supplier performance can have a wide range of causes, from a single activity, behavior, or event to several of them taking place concurrently or in succession.
In some uncontrollable cases of force majeure, the supplier, the organization, and numerous third parties may be directly or indirectly implicated. Anyone engaged could fall victim to circumstances or just bad luck, adopt bad habits, lack knowledge or experience, or inflict harm on themselves by failing to keep track of duties.
“Seventy-eight percent of companies say they don’t
systematically track contractual obligations” – EY Legal
Poor performance of suppliers may be caused by:
• Conviction in abilities, capacity, and knowledge that is overly optimistic
• A lack of readiness to handle disturbances
• Failure to comprehend the organization’s requirements
• Financial challenges
• Workplace disagreements and strikes
• Manufacturing facilities that are destroyed or damaged
• Focus on the inside rather than the outside
• Lack of interpersonal abilities
• Refusal to oppose the organization’s inappropriate demands or actions
• Processes that aren’t reliable and adaptable
• Absence of flexibility, imagination, grit, and resilience
• Uncontrollable force majeure circumstances, such as war, inclement weather, and economic disruption
Organizational factors that may have contributed to a supplier’s subpar performance include:
• Unreasonable or unrealistic requests, as well as any mistreatment of the supplier
• A failure to recognize, keep track of, and address supplier risk
• Financial challenges resulting in recurring payment lateness
• Failure to follow established ordering procedures and protocols
• Failure to address every problem with a supplier’s performance
• Failure to monitor supplier obligations and performance
• Failure to validate performance metrics provided by suppliers
• High-urgency orders are consistently placed, as a result of immature or nonexistent demand management.
• Standards for requirements that are not feasible, exact, complete, or consistent
4. Implications of poor supplier performance
The potential for adverse repercussions, such as the following, are the main implications for the organization:
• The time required to determine whether the provider can improve its performance
• Any requirement to modify the contract to address the circumstances encountered
• The price of filing a lawsuit against the provider in the event of a contract violation
• The difficulties in obtaining the necessary goods and services from other vendors
• The effort to remedy any of its own faults for the underwhelming performance of the supplier
• Greater supplier risks in general if no alternatives are available
• The company’s inability to provide adequate customer service to its own clients
• The ensuing decline in sales from its own clients
• Legal action taken by any impacted clients
• Additional expenses incurred in an effort to resolve the legal or business issues
• Failure of the company
Essentially, poor supplier performance costs the company money, time, and reputation. Additionally, it can put its continuing existence in danger by raising the possibility of client churn.
It is unlikely that a single instance of poor supplier performance will result in all these negative effects. The severity and size of any negative effects will depend on the sort of poor performance, its particular causes, and how early it is recognized.
5. How do you assess poor supplier performance?
When blue widgets are supplied as opposed to the red ones that were ordered or when silver widgets arrive later than expected, for example, some aspects of a supplier’s performance may be instantly apparent.
A straightforward action can be taken to create a free and highly effective early warning system for subpar supplier performance: making public the specifics of negotiated service delivery targets, either for individual orders or for orders in general.
The date the order was placed and the anticipated delivery date should be disclosed to the recipients, or they should be directed to the location of the general delivery lead times information.
Instead of receiving notification from the supplier that an intended delivery date cannot be fulfilled, the order’s stakeholders can keep an eye out for delivery and notify the appropriate parties if it is delayed.
Only when pertinent metrics for a period are supplied can other facets of supplier performance be made known. The supplier’s overall performance throughout the measured period should be obvious provided that the delivery expectations are specified in the contract, the necessary measurements are computed accurately, and periodic efforts are taken to guarantee that the relevant data can be trusted.
Poor performance can happen through stealth, though not always on purpose. It can occur in geographically dispersed, decentralized organizations that lack organization-wide performance reporting.
If the specifics were known at a rolled-up level, the total of relatively minor local occurrences of supplier performance difficulties or trends would very well be cause for alarm.
By centralizing the view of suppliers, their compliance levels, and their continuing performance compared to set targets, a specialized supplier performance management solution may demonstrate its value in this situation.
No significant supplier performance indicators should be ignored or kept a secret, and they must be notified as soon as possible so that the effects of poor performance can be minimized.
6. Understanding why poor supplier performance occurred
It can be challenging to determine whether a supplier’s bad performance is due to some factor unique to the organization alone, or if it is a sign of a far more significant issue impacting the organization’s nation or region, or all of the supplier’s clients.
Following discovery of subpar supplier performance, prompt discussions with the supplier are required to determine the underlying causes, scope, and perpetrators of the reported issues, as well as their potential continuation and duration. It is also necessary to identify any additional factors that may help in understanding the situation.
It can be necessary to involve outside parties to get expert opinions and advise on the causes, effects, and available choices.
7. Accepting responsibility for poor supplier performance
Unsurprisingly, the provider is frequently the main culprit in situations when there is subpar performance. Since they are the ones providing the necessary goods and services, they must be the ones doing it, right?
No, not if the organization is interfering with delivery timeliness, for example by placing orders after cutoff periods and requesting accelerated delivery by the regular due dates, or by providing wrong delivery addresses necessitating reshipment. If certain dates cannot be fulfilled, it would be unfair to place the burden on the provider.
Even if this is the majority of the time the case, automatically blaming the supplier is narrow-minded thinking that can result in embarrassment and apology if it turns out that the organization itself is to blame for, or has contributed to, some part of the supplier’s bad performance.
The company must acknowledge that occasionally one of its employees may make a mistake and that there is always opportunity for improvement in the way it handles supplier performance.
Finding out what kinds of organizational behavior can affect the performance of the supplier and making sure that the right measurements are taken and reported for review along with the supplier’s performance statistics are necessary steps to take in order to prevent this.
To guarantee that the right picture of supplier performance is given after taking into account the disruptions caused by the organization’s behavior, efforts should be made. Any dishonesty in this area is likely to receive karmic retribution at some point.
8. The impossibility of addressing it
It might turn out that there is no practical way to address the underlying reasons for the supplier’s subpar performance. For instance, the supplier might not be able to fulfill pending orders if their manufacturing facilities were destroyed by fire, flood, or conflict after the contract was executed.
Both the supplier and the organization may be excused from completing their responsibilities under the contract in accordance with the legal theories of impossibility and frustration if such conditions were unanticipated at the time the contract was executed.
In the event that this occurs, the organization will most likely need to quickly make other arrangements for obtaining the necessary goods and services.
When there are simply no other suppliers accessible, the issue becomes far more challenging and could endanger the organization’s continued existence. Dealing with such a problem is probably outside the purview of the Contract Manager and is therefore not the subject of this article.
9. How to address poor supplier performance
Expecting that subpar supplier performance can be entirely avoided is unrealistic. Certainly, a supplier and its own supply chain may and should take precautions to attempt to reduce the likelihood of delivery failures, and the organization must also make sure that its own behavior doesn’t adversely affect the supplier’s performance.
Accepting the fact that fate’s capricious finger doesn’t follow anyone’s rules, pay attention to their best-laid plans, or give a damn about the repercussions is a necessary part of life. Things do happen, despite all odds.
Being as prepared as you can, anticipating the unexpected, acting fast, and minimizing harm are the finest things anyone can do.
Dealing with a subpar supplier may involve:
1. Creating and implementing any fixes necessary to restore order.
2. Updating the contract to formally reflect any agreed-upon changes to behavior or procedures.
3. Terminating the agreement or declining to use it.
10. Failing to address poor supplier performance
It is not always successful to address manageable subpar supplier performance. The supplier might not act right away or even later, its justification for a solution might be dubious or irrelevant, or the employed strategy might have fallen short of expectations.
Before failing to address the bad performance becomes obvious, it could take some time. As soon as the failure is acknowledged, discussions between the organization and the supplier are required to raise the stakes, highlight the reality, and emphasize the ongoing impact on the organization.
The issue needs to be raised to a higher management level with both the supplier and the organization, even if the subpar performance isn’t having a significant impact on the organization.
A concise explanation of the problem and its origins, the ramifications for both parties, the current course of action, the results attained, and a list of the factors that contributed to the performance rectification efforts’ failure are all required. A description of the supplier’s contractual responsibilities for service delivery and performance as well as the organization’s rights in the event of performance failures should be included with this.
The goal of the escalation is to come to an agreement on the steps that must be taken to get a fast resolution to the issues, then take those steps.
One or more of the following options may be tried if agreement cannot be reached or the performance concerns cannot be resolved using the agreed-upon actions:
• Additional escalation
• Invocation of the dispute resolution provisions of the Agreement, if any
• lawful action
• Contract cancellation
Summary
Poor supplier performance might have both controllable and uncontrollable factors. However, the relationship between the organization and the supplier is the key to minimizing subpar performance.
A firm foundation is provided by a positive relationship for dealing with instances of subpar supplier performance. Having a tense relationship is detrimental to both parties.
The best that can be done to get performance back to acceptable levels and keep it there requires a commitment to working openly and honestly together to identify what’s wrong and why, develop workable solutions for fixing the problems, plan and implement what can be done immediately and over time, check that it’s working and make adjustments as needed.
Any new or modified performance standards, commitments, and rights should be formalized in the contract as needed.
Achieving a friendly working environment and good supplier performance requires a number of key elements, including mutual trust and respect, a strong and visible intention to stick with the relationship through thick and thin, regular formal and informal communications, agreement on priorities, clear positions on the supplier performance targets and management, joint understanding of the commercial risks and mitigations, and prudent use of “carrots” and “sticks.”
High satisfaction for all parties is a result of a positive partnership and strong supplier performance.
Using the appropriate supplier management technology to provide the knowledge and data to help identify subpar supplier performance is essential to obtaining this high level of satisfaction. This is especially true for companies with extensive geographic reach, several divisions, and interconnected supply networks.
Course Manual 11: Classify Multiple Vendors
The use of Supplier Segmentation for supply base implies categorizing suppliers through analysis and prioritization process solely to allocate suitable resources, manage and monitor them. Unfortunately, no one supplier segmentation applies to every business model. Today, segmentation complexities require multidimensional matrices to address all associated peculiarities and risk factors.
So, What is the Supplier Segmentation Matrix?
The supplier segmentation matrix is created majorly for activities like sourcing negotiations and supply base rationalization. Typical segmentation exercises help define “how dependent your business operation is on a particular supplier(s)?” or “how costly or difficult it is to switching supplier?”.
Nevertheless, there are several other considerations like competition, performance potential, market factors, and other considerations that can add to segmentation challenges. Getting familiar with these attributes or characteristics of critical suppliers can be attained while working with them. A typical approach is examining the supply base by “spend” and “risk.”
• The spend factor entails more concentration on critical suppliers to your business process and on whom you are willing to spend time and resources.
• The risk factor entails the degree of exposure your business has to performance failures from suppliers—for example, late deliveries, service failures, warranty problems, quality defects, and more.
While some risks are common, every business faces its specific types of threats in regards to suppliers. Concerning risk, the identification of vital supplier risk factors that can unfavorably affect your business process can be used for performance evaluations as well as in creating practical preventive actions.
The basic idea of a supplier segmentation matrix is the identification of all suppliers to be considered strategic or critical to the business.
Strategic supplier delivers a product or service which adds value to a business, and if they fail, it impacts the customers, infrastructure, and operations.
Critical supplier delivers a product or service to a business such that if poorly done, either leads to no business operation or unhappiness amongst customers.
Suppliers can be both critical and strategic, as they are not mutually exclusive. Segmentation matrices are mainly useful to initiate a thorough process and discussion within an organization to recognize relevant suppliers who deserve more attention, work, and close monitoring, rather than as a scientific undertaking.
Below are 3 Types of Supplier Segmentation Matrix You Can Use to Classify Suppliers
1. Kraljic’s Classic Supplier Segmentation Model
Kraljic’s portfolio model is a classic supplier segmentation model whose main goals are to identify the strategic weight of strategic suppliers, both externally and internally, to aid adapt your business strategies.
The Kraljic’s Classic Supplier Segmentation matrix aims to guide businesses facing economic, environmental, and technological transformation.
• Strategic suppliers, as earlier highlighted, are vital to attaining high impact and value concerning customer’s business and achieving long-term goals. For instance, strategic suppliers can deliver industry expertise, exceed contractual expectations, and actively manage costs. Any supplier considered as a strategic supplier are prime candidates for performance evaluation.
• The term “leverage supplier,” also called collaborative suppliers, implies leveraging purchase volumes with suppliers who can have a financial impact on a business process via a focus on overall ownership cost and decent profit margins.
• Bottleneck suppliers, also called custom suppliers, are not strategic but provide supplies that have a high dependence on the customers. Thus, such suppliers can generate a supply bottleneck if there is a supply failure or problem. They also present a potential risk of supply interruption, which are essential factors in performance monitoring.
• The noncritical suppliers, also called commodity suppliers, are the easiest to replace as their products and services are not considered critical or high risk to the business process. They also require less attention, other than focus on operational efficiency when engaged in a deal.
The difficulty with Kraljic’s Classic Supplier Segmentation matrix is the terms are imprecise, i.e., the categorization of suppliers is hard. Also, there are no guidelines to help quantify factors like risk and profit impact. The time spent in defining and quantify these concepts may not be worthwhile, especially when segmenting for performance measurement and monitoring.
In terms of supplier management and development, it is impossible to show multiple dimensions using one matrix. In this case, the matrices segment suppliers, according to categories of importance. For instance, the matrix covers suppliers’ level of commitment and specific strategic plans for building customer relationships.
For example, suppliers’ level of commitment to the customer (in Table 1) analyses which suppliers are committed to customers and value. A committed relationship, open communications, and trust are factors that help reduce risk.
Table 1. Supplier Commitment Matrix
For supplier characterization matrix (Table 2) covers the characterizing suppliers based on product development. It exclusively covers how suppliers can contribute to improving the product and potential redesign options.
Table 2. supplier characterization matrix
Another supplier characterization matrix (for spend, Table 3) characterizes attention needed in terms of spend and risk. Where the risk is high, and the spend is low, more care is required in the supplier category. In the case of high spend, there’s a need for a relationship/partnership. Low-risk, high-spend suppliers entail less focus on the relationship and more on contract terms, as it is usually not worth it.
Table 3. supplier characterization matrix (spend)
2. Segmentation for Supplier Performance Management Actions
For performance management, businesses are expected to address the number of resources and time to invest in the development and management of supplier relationships alongside the procurement expertise level.
The supplier management matrix (in Table 4) incorporate multiple dimensions like an investment in the relationship, strategic importance, focus on Total Cost of Ownership (TCO) set against dependence on the supplier, criticality of the supplier, and switching difficulty. These actions vary in the type of supplier you choose.
The supplier segmentation matrix above also delivers general guidelines expected for focus on supplier performance management and measurement for collaborative, commodity, custom, and strategic supplier segments. This supplier segmentation matrix also addresses the experience level required by supply management personnel.
In Segmentation for Supplier Performance Management Actions, “custom” and “strategic” suppliers in any business operation often holds the highest risk and require monitoring. Nevertheless, the performance of “custom” suppliers require monitoring because they are critical to the business. Also, they are not classified as cost reduction prospects, as they generally involve less detailed performance monitoring and measurement.
Investment in relationships and more accurate evaluations are vital for “collaborative” and “strategic” suppliers. It entails more specific industry expertise in the management of strategic suppliers and less overall experience for commodity suppliers. For the custom supplier, it requires more experienced personnel to manage its performance, as faults can lead to a total business shutdown.
• The emphasis with strategic suppliers is highlighted through vital values, relationship value, and contribution to business growth.
• Continuous improvement is also essential for collaborative suppliers as they have a financial and operational impact on the business. The use of performance measures for financial and operational roles is considered vital.
• Custom suppliers offer continuity of supply with service levels and operational performance measures deemed useful.
• Commodity suppliers feature the lowest impact on business operations but can sometimes affect internal customer satisfaction.
For performance measures, the focus is typically on operational performance basics. For relationships with more strategic and partner-like connections amongst business and supplier, the more supplier performance hinges on non-contractible areas.
3. Supplier Segmentation Based on Relationship & Potential
This supplier segmentation matrix employs the process of segmenting the supplier base to establish a suitable engagement level for suppliers. The level definition helps in resource allocation required to sustain the business process. The different levels highlighted in the Supplier Segmentation Based on Relationship & Potential include Preferred (Strategic), Develop/Emerging, Maintain, Directed Suppliers, and Eliminate/Exit.
Additionally, the business requirements and Segmentation vital to this category strategy are further explained using the different headings (Definition, Benefits, Prerequisite Guidelines, and Supplier Criteria (Ideals)) in Table 5.
The Supplier Development Framework
Table 5. Supplier Segmentation Based on Relationship & Potential
Conclusion
The use of the Supplier Segmentation Matrix is an essential step in designing and implementation a robust business operation. The types highlighted above can find usefulness in most organizations having a wide range of attributes and priorities. With the aid of Supplier Segmentation Matrix, businesses can identify key value drivers, define suitable engagement levels and frequency.
Course Manual 12: Vendor Audit
Vendor Audit Process
Vendor audits are quickly becoming a best practice across industries given significant third-party risks in data privacy, cybersecurity, corruption and other areas. Clarip assists with this process by helping organizations build greater internal understanding of the information that it is sharing with its third-party vendors through the Data Risk Intelligence scans.
What is a vendor audit?
A vendor audit is used by organizations to evaluate a third-party hired by the organization. An audit can look at a number of different issues, such as the organization’s quality control, its costs vs. benefits, its cybersecurity protection, or other aspects.
In the privacy context, third-party vendor risk management is becoming an area that businesses are enhancing. The Cambridge Analytica scandal has put third-party data sharing front and center in the eyes of regulators and the media. Organizations that are only looking at their own practices and are not evaluating their vendor data practices are missing a key area of concern.
What are the Benefits and Costs of a Vendor Audit?
An organization’s efforts to oversee vendors can be expensive, time-consuming and difficult. At the highest levels, it would require site visits, internal document review and interviews of key vendor stakeholders.
However, vendor management can occur at a number of levels and organizations may decide that their concerns can be satisfied with a lower level of scrutiny. Some organizations may decide that the risk with a vendor is minimal based on their activities within the organization and a questionnaire sent to the third-party vendor for response may be sufficient to gain the clarity that it needs to continue its relationship with them.
Notwithstanding the efforts that can be required to understake vendor management, organizations may not be able to avoid enhanced efforts in this area. Facebook may have avoided significant regulatory and media scrutiny over the past year if it had engaged in more substantial efforts in vendor risk management. As vendors are asked to do more for organizations, or third-parties are provided with significant data, the oversight on them needs to correlate to the risks. Yet, as Cambridge Analytica shows, even small organizations can cause significant problems for a large organization.
What may occur as part of the vendor audit process?
In general, vendor audits may include some or all of the following:
– Review of the third-party’s books and records.
– Data analysis on transactions and records.
– Sampling of high risk transactions.
– Phone or In-Person interviews with third-party personnel.
– Vendor questionnaires.
– Site visits.
– Review of contracts, policies and other documents.
– Documentation of findings and any correction plans.
Effective Vendor Management Process Balancing
The amount of time and resources that should be put into a vendor audit depends in large part on the risks that a third-party may pose within the organization. If a service provider has minimal access to data (in the privacy context), then it may warrant a lower level of scrutiny.
Types of supplier audits
Supplier audits can be broken down into three major types in the way they are implemented. Allowing for a more robust strategy to ensure suppliers are up to standard. These types are:
Announced audits:
This audit involves giving prior notice to suppliers before an audit is conducted. Both parties agree on this before the inspection occurs, allowing for ample preparation time. Although this style is effective, it can somewhat lack genuineness as any issues can be hidden before the selected date.
Unannounced audits:
Unannounced audits are when no prior knowledge of the date of inspection is given. This is a growing style of inspection as it allows for an insight into the daily operations and practices used onsite. Making sure that nothing has been prepared beforehand (which can occur in announced visits).
Desktop audits:
Desktop audits do not require an inspector to visit the site in person. However, this is more focused on checking that documentation and certificates of the supplier is up to date. These can be things like the ISO 9001 certification, which certifies their quality management system to ensure they are up to the required and agreed level set out by the organisation collaborating with the supplier and governing bodies that regulate the industry.
Supplier Audit Procedure
A Supplier audit is bespoke to the organisation’s needs; therefore, it can differ between inspections. However, in general there is a common guideline that is used. Below will go through a typical “announced audit” and the processes which follow:
1. Pre Audit questionnaire and pre-inspection meeting
This involves the collection of information regarding the supplier and which processes and procedures are in place. Allowing for a clear purpose and list of objectives to be made.
2. Team selection
From here, a team will be created to best match the audit type. These staff members will be chosen based on the expertise within this audit type to conduct the inspection correctly.
3. Notification of audit to supplier
After a team is selected, a notification is given to the supplier in writing (with several months notice) to allow them to prepare. Written notifications also contain:
• The purpose of the audit
• The schedule of the inspection
• Names and details of the auditors
4. Pre-inspection meeting
This involves a brief introduction to the auditors and finalising any changes to the inspection schedule.
5. Execution of Supplier audit
After the meeting is adjourned, the inspection will begin in which the auditors will inspect each aspect of the brief using a checklist based on the original goals and objectives. This checklist comes in the form of an observation sheet (OS) which records the inspector’s findings.
6. Reporting on findings and closure of audit
Once the audit is completed, the auditor’s group together to compare and discuss the findings. Once this is done, a report is made based on the inspection with feedback for improvements or if they are up to the requirement which has been set out. Once this has been sent, the audit may be closed.
Tips to help when conducting a supply audit
When organising a supply audit. There are certain factors to be aware of which can assist in producing a more robust audit. These things include:
Research customer complaints
Customer complaints can be a useful resource for understanding key danger points with a supplier. If an organisation is researching a specific product or service of the supplier, requesting previous complaints which have been formally submitted can give insight into failures within the service. If there is repetitiveness within these complaints, it can indicate that the product or service is not up to standard.
Check if a supplier is outsourcing
Suppliers can often outsource work to subcontractors to assist in the completion of orders and provide for clients. Understanding if suppliers partake in this can help clarify their performance and, ultimately their final product. It is important to ask whether or not they do use subcontractors and, if they do, are there correct quality agreements that align with your organisation requirements.
As well as this understanding, the relationship between the supplier and its subcontractor can illuminate potential issues if the relationship is poor.
The importance of implementing a supplier audit
As organisations grow their supply chain, choosing the correct supplier is imperative. As their reputation and quality can assure that a business can run smoothly without any issues or risks. Because of this, a supplier audit is almost essential to assist in the decision making process. Some of the benefits of implementing a supplier audit are:
Reveals potential risks
A supplier audit can review all production processes, including shipping, manufacturing, and quality processes. Giving insight to gaps they may have and check if these will cause any issues with the delivery to a client. Therefore potentially mitigating delays or deformities in the product.
Improves customer satisfaction
An organisation relies on its reputation with customers. This is done through the quality of the products put forth to them. Implementing strong standards and ensuring a supplier is following them allows for customer satisfaction to be upheld. A supplier audit can assist in the quality control processes of a supplier to potentially mitigate any product quality issues or safety issues. It is also a way for an organisation to measure the performance of the supplier.
Helps build communication with suppliers
A supplier audit is also a way to improve and maintain strong communication with a supplier. Having clear visibility and understanding of suppliers activities can assist with improvements and the business relationship. Regularly scheduled audits can ensure objectives are being met and can be constantly developed depending on the organisation’s needs.
The supplier audit report
When supplier audits are conducted, an organisation will follow a laid out procedure to consistently measure supplier’s quality and compliance. This is recorded in a supplier audit report. This report contains all the details of the audit, this includes:
• Details of the factory, including key team and location.
• A summary of the audit results.
• Key attention points that provide more details regardings the faults and general comments.
• A list of follow up suggestions to improve the supplier.
• A full audit list that includes general information and all the detailed inspection findings that work in an ABC quality scale.
• Finally, a section for images taken whilst on location to provide evidence of any faults.
Workshop Exercises
Vendor Evaluation Exercises
01. Collect Vendor Data: Explain in your own words how this process will directly impact upon your department?
02. Price & Cost Analysis: Explain in your own words how this process will directly impact upon your department?
03. Managing Vendor Risk: Explain in your own words how this process will directly impact upon your department?
04. Vendor Communication: Explain in your own words how this process will directly impact upon your department?
05. Vendor Relationship: Explain in your own words how this process will directly impact upon your department?
06. Vendor Culture: Explain in your own words how this process will directly impact upon your department?
07. Vendor Stability: Explain in your own words how this process will directly impact upon your department?
08. Vendor Viability: Explain in your own words how this process will directly impact upon your department?
09. Vendor Quality: Explain in your own words how this process will directly impact upon your department?
10. Vendor Performance: Explain in your own words how this process will directly impact upon your department?
11. Classify Multiple Vendors: Explain in your own words how this process will directly impact upon your department?
12. Vendor Audit: Explain in your own words how this process will directly impact upon your department?
SWOT & MOST Analysis Exercises
01. Undertake a detailed SWOT Analysis in order to identify your department’s internal strengths and weaknesses and external opportunities and threats in relation to each of the 12 Vendor Evaluation processes featured above. Undertake this task together with your department’s stakeholders in order to encourage collaborative evaluation.
02. Develop a detailed MOST Analysis in order to establish your department’s: Mission; Objectives; Strategies and Tasks in relation to Vendor Evaluation. Undertake this task together with all of your department’s stakeholders in order to encourage collaborative evaluation.
Project Studies
Project Study (Part 1) – Customer Service
The Head of this Department is to provide a detailed report relating to the Vendor Evaluation process that has been implemented within their department, together with all key stakeholders, as a result of conducting this workshop, incorporating process: planning; development; implementation; management; and review. Your process should feature the following 12 parts:
01. Collect Vendor Data
02. Price & Cost Analysis
03. Managing Vendor Risk
04. Vendor Communication
05. Vendor Relationship
06. Vendor Culture
07. Vendor Stability
08. Vendor Viability
09. Vendor Quality
10. Vendor Performance
11. Classify Multiple Vendors
12. Vendor Audit
Please include the results of the initial evaluation and assessment.
Project Study (Part 2) – E-Business
The Head of this Department is to provide a detailed report relating to the Vendor Evaluation process that has been implemented within their department, together with all key stakeholders, as a result of conducting this workshop, incorporating process: planning; development; implementation; management; and review. Your process should feature the following 12 parts:
01. Collect Vendor Data
02. Price & Cost Analysis
03. Managing Vendor Risk
04. Vendor Communication
05. Vendor Relationship
06. Vendor Culture
07. Vendor Stability
08. Vendor Viability
09. Vendor Quality
10. Vendor Performance
11. Classify Multiple Vendors
12. Vendor Audit
Please include the results of the initial evaluation and assessment.
Project Study (Part 3) – Finance
The Head of this Department is to provide a detailed report relating to the Vendor Evaluation process that has been implemented within their department, together with all key stakeholders, as a result of conducting this workshop, incorporating process: planning; development; implementation; management; and review. Your process should feature the following 12 parts:
01. Collect Vendor Data
02. Price & Cost Analysis
03. Managing Vendor Risk
04. Vendor Communication
05. Vendor Relationship
06. Vendor Culture
07. Vendor Stability
08. Vendor Viability
09. Vendor Quality
10. Vendor Performance
11. Classify Multiple Vendors
12. Vendor Audit
Please include the results of the initial evaluation and assessment.
Project Study (Part 4) – Globalization
The Head of this Department is to provide a detailed report relating to the Vendor Evaluation process that has been implemented within their department, together with all key stakeholders, as a result of conducting this workshop, incorporating process: planning; development; implementation; management; and review. Your process should feature the following 12 parts:
01. Collect Vendor Data
02. Price & Cost Analysis
03. Managing Vendor Risk
04. Vendor Communication
05. Vendor Relationship
06. Vendor Culture
07. Vendor Stability
08. Vendor Viability
09. Vendor Quality
10. Vendor Performance
11. Classify Multiple Vendors
12. Vendor Audit
Please include the results of the initial evaluation and assessment.
Project Study (Part 5) – Human Resources
The Head of this Department is to provide a detailed report relating to the Vendor Evaluation process that has been implemented within their department, together with all key stakeholders, as a result of conducting this workshop, incorporating process: planning; development; implementation; management; and review. Your process should feature the following 12 parts:
01. Collect Vendor Data
02. Price & Cost Analysis
03. Managing Vendor Risk
04. Vendor Communication
05. Vendor Relationship
06. Vendor Culture
07. Vendor Stability
08. Vendor Viability
09. Vendor Quality
10. Vendor Performance
11. Classify Multiple Vendors
12. Vendor Audit
Please include the results of the initial evaluation and assessment.
Project Study (Part 6) – Information Technology
The Head of this Department is to provide a detailed report relating to the Vendor Evaluation process that has been implemented within their department, together with all key stakeholders, as a result of conducting this workshop, incorporating process: planning; development; implementation; management; and review. Your process should feature the following 12 parts:
01. Collect Vendor Data
02. Price & Cost Analysis
03. Managing Vendor Risk
04. Vendor Communication
05. Vendor Relationship
06. Vendor Culture
07. Vendor Stability
08. Vendor Viability
09. Vendor Quality
10. Vendor Performance
11. Classify Multiple Vendors
12. Vendor Audit
Please include the results of the initial evaluation and assessment.
Project Study (Part 7) – Legal
The Head of this Department is to provide a detailed report relating to the Vendor Evaluation process that has been implemented within their department, together with all key stakeholders, as a result of conducting this workshop, incorporating process: planning; development; implementation; management; and review. Your process should feature the following 12 parts:
01. Collect Vendor Data
02. Price & Cost Analysis
03. Managing Vendor Risk
04. Vendor Communication
05. Vendor Relationship
06. Vendor Culture
07. Vendor Stability
08. Vendor Viability
09. Vendor Quality
10. Vendor Performance
11. Classify Multiple Vendors
12. Vendor Audit
Please include the results of the initial evaluation and assessment.
Project Study (Part 8) – Management
The Head of this Department is to provide a detailed report relating to the Vendor Evaluation process that has been implemented within their department, together with all key stakeholders, as a result of conducting this workshop, incorporating process: planning; development; implementation; management; and review. Your process should feature the following 12 parts:
01. Collect Vendor Data
02. Price & Cost Analysis
03. Managing Vendor Risk
04. Vendor Communication
05. Vendor Relationship
06. Vendor Culture
07. Vendor Stability
08. Vendor Viability
09. Vendor Quality
10. Vendor Performance
11. Classify Multiple Vendors
12. Vendor Audit
Please include the results of the initial evaluation and assessment.
Project Study (Part 9) – Marketing
The Head of this Department is to provide a detailed report relating to the Vendor Evaluation process that has been implemented within their department, together with all key stakeholders, as a result of conducting this workshop, incorporating process: planning; development; implementation; management; and review. Your process should feature the following 12 parts:
01. Collect Vendor Data
02. Price & Cost Analysis
03. Managing Vendor Risk
04. Vendor Communication
05. Vendor Relationship
06. Vendor Culture
07. Vendor Stability
08. Vendor Viability
09. Vendor Quality
10. Vendor Performance
11. Classify Multiple Vendors
12. Vendor Audit
Please include the results of the initial evaluation and assessment.
Project Study (Part 10) – Production
The Head of this Department is to provide a detailed report relating to the Vendor Evaluation process that has been implemented within their department, together with all key stakeholders, as a result of conducting this workshop, incorporating process: planning; development; implementation; management; and review. Your process should feature the following 12 parts:
01. Collect Vendor Data
02. Price & Cost Analysis
03. Managing Vendor Risk
04. Vendor Communication
05. Vendor Relationship
06. Vendor Culture
07. Vendor Stability
08. Vendor Viability
09. Vendor Quality
10. Vendor Performance
11. Classify Multiple Vendors
12. Vendor Audit
Please include the results of the initial evaluation and assessment.
Project Study (Part 11) – Logistics
The Head of this Department is to provide a detailed report relating to the Vendor Evaluation process that has been implemented within their department, together with all key stakeholders, as a result of conducting this workshop, incorporating process: planning; development; implementation; management; and review. Your process should feature the following 12 parts:
01. Collect Vendor Data
02. Price & Cost Analysis
03. Managing Vendor Risk
04. Vendor Communication
05. Vendor Relationship
06. Vendor Culture
07. Vendor Stability
08. Vendor Viability
09. Vendor Quality
10. Vendor Performance
11. Classify Multiple Vendors
12. Vendor Audit
Please include the results of the initial evaluation and assessment.
Project Study (Part 12) – Education
The Head of this Department is to provide a detailed report relating to the Vendor Evaluation process that has been implemented within their department, together with all key stakeholders, as a result of conducting this workshop, incorporating process: planning; development; implementation; management; and review. Your process should feature the following 12 parts:
01. Collect Vendor Data
02. Price & Cost Analysis
03. Managing Vendor Risk
04. Vendor Communication
05. Vendor Relationship
06. Vendor Culture
07. Vendor Stability
08. Vendor Viability
09. Vendor Quality
10. Vendor Performance
11. Classify Multiple Vendors
12. Vendor Audit
Please include the results of the initial evaluation and assessment.
Program Benefits
Information Technology
- Agile IT processes
- Improved value delivery
- Decreased defects
- Continuous improvement
- Modernized infrastructure
- Re-tooled staff
- Increased morale
- IT Business partnership
- Meaningful metrics
- Effective sourcing
Management
- Decreased costs
- Aligned strategies
- Servant leadership
- Clarified priorities
- Improved effectiveness
- Improved transparency
- Reduced risk
- Measurable results
- Satisfied customers
- Vendor partnerships
Human Resources
- Empowered teams
- Servant leaders
- Re-tooled staff
- Improved teamwork
- Enhanced collaboration
- Improved performance
- Reduced turnover
- Improved loyalty
- Leadership development
- Employee development
Client Telephone Conference (CTC)
If you have any questions or if you would like to arrange a Client Telephone Conference (CTC) to discuss this particular Unique Consulting Service Proposition (UCSP) in more detail, please CLICK HERE.