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project on SMALL Scale industries & Marketing Management & Public Relations
- Thread starter mayur_nahar
- Start date
shailendra.vet
New member
Re: project on SMALL Scale industries & Marketing Management & Public Relations
thanks............................................................................................
thanks............................................................................................
amit.tasmac
New member
Re: project on SMALL Scale industries & Marketing Management & Public Relations
nice project...........good job
i need some elaborate case study about marketing construction chemicals in india
nice project...........good job
i need some elaborate case study about marketing construction chemicals in india
Michelle Rodrigues
Michelle Rodrigues
Re: project on SMALL Scale industries & Marketing Management & Public Relations
Good Work.....................................................!!!!!!
Good Work.....................................................!!!!!!
Qasimronak
New member
Re: project on SMALL Scale industries & Marketing Management & Public Relations
Guys i need a SIDBI Project....urgently....pls help me.....If u have one pls send it to me on [email protected]
Guys i need a SIDBI Project....urgently....pls help me.....If u have one pls send it to me on [email protected]
swathi9889
New member
Re: project on SMALL Scale industries & Marketing Management & Public Relations
how do u see the projects dat r uploaded by others
how do u see the projects dat r uploaded by others
JOSEPHJIJO
New member
Re: project on SMALL Scale industries & Marketing Management & Public Relations
thankss dudeee.....................................
thankss dudeee.....................................
manage suppliers
TLIR1407A
Manage suppliers
Diploma of logistics
HAPPY P RANA
SUPPLIER EVALUTION: BENEFITS, BARRIERS, BEST PRACTICES
Executive Summary
Measuring and understanding the performance of suppliers is critical to ensuring a well-functioning supply chain and to promoting a company’s own competitive position. Ultimately, improving the performance of key suppliers is the goal. With so much of the companies’ operations dependent upon the smooth flow of quality goods and services from suppliers, company can’t afford not to measure and understand supplier performance. It is important to Recognizing hidden cost drivers in the customer-supplier relationship. Determining a measurement approach and understanding the positives and negatives of various approaches. Making sure the evaluation approach is aligned with company objectives and culture. Identify actionable opportunities for supplier improvement for the future.
As companies increasingly focus on their core competencies and outsource a greater percentage of the cost of goods sold, their performance becomes increasingly dependent upon that of their suppliers. Companies that evaluate their supply base find they have better visibility into supplier performance, uncover and remove hidden cost drivers, reduce risk, increase competitive advantage by reducing order cycle times and inventory, gain insight on how to best leverage their supply base, and align practices between themselves and their suppliers. Companies pursuing supplier assessment commonly see more than a 20% improvement in supplier performance metrics (e.g., on-time delivery, quality, and cost).Still many companies say that they are not satisfied with their current supplier evaluation methods or are doing minimal evaluation.
The challenges to evaluating suppliers are numerous. Assessment can be costly, inefficient, and inconsistent. From an analytics perspective, many approaches are inadequate and unable to provide the insight needed to drive better decision making and performance improvement. The analyses miss qualitative input, do not identify the root cause of performance issues, and do not align customer and supplier practices. Many companies do not perform supplier evaluations beyond a few basic metrics. And many of those who do evaluate performance are not satisfied with their methods and results.
Understanding supplier performance can both prevent problems and facilitate performance improvement. By doing so it will it clear to Understand the value of evaluating suppliers (and the risks of not doing so), Recognize the hidden cost drivers in the customer-supplier relationship, Understand various supplier performance evaluation approaches and their relative merits and shortcomings. Get insight into best practices in supplier evaluation
WHY MEASURE SUPPLIER PERFORMANCE?
Increase performance visibility. Companies cannot manage what they cannot measure. If they do not know the facts about how their suppliers are performing, supplier management will be based on guesses about supplier performance. With enterprises managing hundreds and even thousands of suppliers, the supplier management process can be hectic and difficult to handle and many suppliers may remain untouched. To better manage the multitude of suppliers, it is critical to establish consistent benchmarks and goals to which suppliers can adhere.
Moreover, when companies measure suppliers, the simple act of monitoring them can drive performance improvement. By asking suppliers to meet specific performance goals, they not only will rise to the challenge, but often will aspire to surpass them—resulting in supplier improvement. This improvement can be even more dramatic when companies award additional business on the basis of suppliers meeting performance goals.
Uncover and remove hidden waste and cost drivers in the supply chain. The enterprise supply chain is full of inefficiencies. Some of these inefficiencies lie in the “white spaces” between organizations and can be improved by better communications between customers and suppliers. Others are a result of poor business practices at the supplier that can result in increased inventory, quality problems, higher costs, and slow deliveries. By more closely managing and measuring supplier performance, the enterprise can find more ways to help suppliers drive waste and inefficiency out of the business, resulting in higher-quality suppliers and lower costs. For example, rigorous measurement and verification of supplier quality can help companies eliminate incoming inspection, reduce supplier non-conformances, and remove the associated costs.
Increase competitive advantage by shrinking order cycle times and reducing inventory. Time is money, and by measuring and improving supplier performance and by reducing supplier quality problems, for example, a company eliminates wasteful steps in its own processes. For example, supplier materials can go straight to the point of use without incoming inspection because it is of the highest quality to begin with. Companies can reduce such wasteful costs and activities, typically caused by supplier glitches, as: additional inspections, extra freight charges, overtime (to catch up), safety stocks, obsolete inventory, buying from multiple sources (which reduce price leveraging), etc. When supplier performance gets to the level where materials are shipped more frequently and in smaller quantities straight to where they will be used, instead of stockpiled in a warehouse or on the floor “just in case,” order velocity increases and inventory is reduced as a result. The same goes for office supplies and MRO products. In fact, cycle time is a key indicator of business health. When the velocity of cycle times is high, then other aspects of a business are running smoothly.
Gain insight on how best to leverage the supply base. The better the quality of the supplier, the better the product or service the enterprise produces. By measuring supplier performance, an enterprise can set a certain threshold for its suppliers, thus leading to higher-quality results. When a company understands its suppliers’ capabilities and their levels of performance, it can better plan new products and services. The capabilities of its supply chain are, in fact, a large part of its own capabilities as a company. An example of when this knowledge is important is a make-versus-buy decision. If a company does not understand its suppliers, it may not know whether or not buying a product or service is better than producing it internally. As another example take deciding whether or not to outsource offshore. Understanding one’s local suppliers can help a company decide if they are capable of reducing total costs enough to outperform offshore suppliers. Also, suppliers can provide technologies to their customers that help customers develop new products and services that add revenue to the customer’s bottom line and enhance their position in the marketplace. Thus suppliers can help their customers add value to the top line in addition to helping remove cost from the bottom line.
Align customer and supplier business practices. Ideally, suppliers should run their business in alignment with their customers. They should share the same business ethics, expect similar standards of excellence, show commitment to continuous improvement, and be a cultural match. Take the lean enterprise or any high performance system for example, and consider how requirements of those for shorter delivery times, lower prices, and higher quality could actually have an adverse impact on a supplier who is not aligned with the customer. For example:
• In response to a requirement for just-in-time (JIT) delivery, a supplier might actually increase its cost structure by building up an inventory to meet the requirement rather than by making to order
• If the supplier starts inspecting quality into the product instead of building quality in, more resources are required, impacting the company’s cost structure. Quality could actually deteriorate in response to a requirement to improve it. And costs will rise, as more steps and resources are required to inspect and fix problems after the fact.
Another need for alignment is around having a culture of continuous improvement. A supplier who does not try to improve or for whom continuous improvement is not a way of life will not be able to keep up with its customers’ increasing requirements for better, cheaper, faster goods and services.
Improve Supplier Performance
The goal of supplier evaluation is supplier performance improvement. There is the positive effect on performance of simply measuring it. But supplier evaluation is most effective when it leads to continuous improvement activities and actual supplier performance improvement. This is where the return on investment can benefit both the supplier and the customer. The customer and supplier need to identify areas of opportunity for improvement that can positively impact the supplier’s business in the areas of cost, quality, responsiveness, etc and provide the customer with the benefits that improved supplier performance can offer. Supplier evaluation systems need to address both the traditional quantitative indicators such as quality, on-time delivery, and cost management as well as the underlying qualitative factors. The root causes of performance difficulties can be hard to uncover and require understanding the underlying business practices, cultural factors and even the leadership at the supplier. Follow-up activities, such as supplier training and development, and corrective actions to address supplier evaluation findings are the best ways to obtain measurable and positive results.
APPROACHES TO EVALUATING SUPPLIERS:
Questionnaires
A traditional approach to evaluating suppliers has been to send out questionnaires to gather information on suppliers. Paper questionnaires, even those sent electronically by email, present several challenges. First, they require knowledge of what to measure and how to measure it. Questionnaires are easy to construct poorly and hard to do well. Often, companies ask for information that is never really used or acted upon – data for the sake of data. Or, once collected, the information is hard to access. One person at the supplier, typically a quality manager or the business owner, fills them out, so it’s harder to get at the real situation at the supplier. Also, getting suppliers to fill out these documents in a timely fashion is sometimes a challenge.
Extracting and reporting on information from business systems
Some companies extract information from various internal business systems such as quality systems, ERP systems, financial systems, and internal surveys. Building internal scorecards by extracting data from a variety of sources can be a costly and complex undertaking. Data obtained this way may need to be scrubbed, aggregated and distilled to a supplier scorecard. Information from internal systems is useful and essential, but may have limitations. It typically requires human intervention and maintenance to be useful. Data integrity can be questionable due to internal issues, e.g., a shipment sits on the dock for days and the supplier is deemed “late”. Suppliers may take up time disputing the information. Of course, communications and follow up with suppliers about their results is critical to make this approach successful.
Site visits
Site visits can provide very effective insights and information in understanding a supplier. See to believing, especially if a company sends a well-trained, person or team, capable of doing such evaluations. Site visits must use both robust evaluation techniques and survey instruments to be effective. And the assessors must know how to do them so that they see beyond the veneer while being respectful of the supplier.
The biggest challenges to site visits are: the resources to fund and deploy them, good site visit evaluation tools, and a good follow-up planning process to ensure that important findings are addressed.
Certification to third party standards
Many companies rely on third party standards to vet out suppliers and may consider ISO9001 or QS-9001 registration, for example, sufficient. While these standards are a welcome addition to a supplier’s credentials, they may not be sufficient to ensure quality, performance, or alignment with a customer’s needs. Many companies find that they improve their processes simply by the act of documenting them. That is, they get a better view of how they run their business during the registration process and then take action to improve their processes. The downside to using third party standards as a source of truth about suppliers is that they simply do not ensure quality. Often companies spend more time documenting current procedures than improving either the procedures or their performance.
Supplier Evaluation/Performance Management Software
Third party software is available for creating supplier KPIs and scorecards, as well as for web-enabling the traditional site visit. It can provide a scalable and consistent alternative. Holistic solutions can link supplier evaluation results to other decisions and actions in the sourcing and supplier management process. And these solutions can help uncover root causes of supplier performance problems so that they can be more readily addressed. This approach is probably most suitable for mid to larger-size companies.
BEST PRACTICES
Measuring Supplier Business Practices
A large aerospace and defense company measures the deployment of best practices to determine preferred supplier status. This company used to send 5-6 assessors on a site visit to a supplier for a week, but is now using software tools to deploy the assessment. They now need 2 people for 2 days to accomplish the assessments.
Focusing on Supplier Cycle Time
An equipment manufacturer uses supplier cycle time as a key indicator of business health and partner status. Suppliers can drop a level in their overall ratings if their cycle time increases.
Transforming Data into Decision-making Information
Another manufacturer gathers supplier performance data from 25 systems into a data warehouse, where it is transformed into KPIs and shared with suppliers.
Gathering Internal Customer Feedback on Indirect Suppliers
A major pharmaceutical company continuously gathers feedback from internal surveys on 25 dimensions of supplier performance and internal customer satisfaction using an “always on” mechanism.
Negotiate with suppliers
Every business needs to buy in goods and services and these will often represent a large proportion of costs. So any reduction in these costs will have a significant and direct impact on profits. There are many ways you can achieve cost reduction, from supplier selection to better negotiation. When dealing with your suppliers, it is important to remember that you are usually dealing with salespeople who have been trained to get exactly what they want from you. . The best way to be is to control the relationship and to negotiate arrangements with suppliers
1. Ask
The first and most obvious way to get a better price is to ask for it, yet few people do. They just accept the list price. Get into the habit of asking, “What is my discount this month?” Some salespeople will just laugh and say “Good try,” but many others will respond: “I can only give you 10 per cent, I’m afraid.” That’s 10 per cent more than you had before.
Alternatively try asking, “What is your best price?” If they ask why, give any excuse: “Introductory discount for new customer”; “Loyalty discount for repeat customer”; or just be brazen and say you need a better price. You have nothing to lose.
2. Show potential
As a smaller business, it is easy to believe you are insignificant. This may be true, but there is no reason why you cannot act like a larger organization, particularly when it comes to buying.
Almost every business tends to follow Pareto’s Law, with 80 per cent of their trade coming from 20 per cent of their customers. If you are among the long tail of a supplier’s lesser customers, they are unlikely to spend much time wooing you or putting themselves out for you. Unless, that is, you can show you are a professional customer, are easy to do business with, pay promptly and have growth potential. Then you are the kind of customer that salespeople dream about.
3. Prepare
All good salespeople think about what they want from a meeting with a customer well in advance. They will know precisely what they want to achieve and how far from this target they will stray. Most buyers only start to think about what they want when in the meeting itself and so they are often unprepared to strike the best deal.
For a start, get hold of a price list. Then take a few minutes before a meeting to think about the prices and terms you need. Consider the arguments you will put forward to get these. What compromises would you be prepared to make? What can you offer them that they value, but which might cost you little? Can you barter? Even if you are short of time, setting aside just ten minutes to do this will give you invaluable negotiating muscle.
4. Calculate the pay-off
Part of your preparation should include various calculations. For example, if your credit terms are normally 30 days, what would be the pay-off if you were to pay cash on delivery, or even payment or part-payment with order? This may necessitate a bank overdraft. How much would that cost you? What discount rate would make this option viable?
On the other hand, what savings would you make if you were to negotiate 60-day credit terms? If you had to pay a slightly higher price, how much extra could you afford to make this a viable proposition?
5. Understand salespeople
The biggest danger when negotiating with a supplier is to think that the pressure is all on your side; that the salesperson can take or leave your offer, but that you have to accept theirs. Yet salespeople all have bosses to satisfy, targets to meet and jobs to keep. In a sense, they can be more hampered than you!
6. Be realistic
Salespeople know the price they want to achieve. So it is much easier if you too have a specific figure in mind. If they want £100 and you are aiming for £80, then you will probably settle somewhere in between, rather than at their price. But be realistic with your offer, or the salesperson will just think you are wasting time, and walk away.
7. Look for alternatives
It is also easy to imagine that (a) there is only one supplier you can deal with and (b) that supplier is doing you a favor by taking your order. If the former is true, you are in a dangerous position and should, as a priority, seek ways out of that corner.
In practice, though, there is almost always another supplier, and probably a better one. They might not offer exactly the same, but a substitute may prove more than adequate.
Learn about your supplier’s competition. For a start, contact the British Library Business and Intellectual Property Centre. It offers a comprehensive service to help you source products and services around the world. Also, try using the Internet to find alternative suppliers.
8. Use the competition
Salespeople make the best offers when they know they have real competition. So, having established that you have other suppliers who can step in, drop their names early into a conversation with your current salesperson. You may even want to make sure their competitor’s name is on the same page in your visitors’ book if you have However, keep the details of this rival offer unspecified as this puts the pressure on them to better an undisclosed proposal. They may start throwing in other concessions that you did not even know existed.
9. Seek other benefits
Things other than just price can be important to you. Before narrowing the discussion down to price, broaden it to find out what else the supplier might be able to do for you. They might be able to hold stock for rapid delivery, give you extended payment terms, or offer you lower delivery charges if you agree to let them deliver when it suits them.
10. Tap the marketing pot
While the salespeople may not be able to give you additional discounts, their marketing department may be able to contribute in other ways. For example, by co-funding an advert or mail shot, putting up a prize for a competition, or allocating space on their stand at an exhibition. Suppliers often have a separate marketing budget and are eager to find good ways to spend it.
The supplier may also be in a position to offer added value for your customers, like give-away or an extended warranty. Only after you have explored all these extras should you focus on price.
11. Haggle
Never accept the first offer. If you do, you may find that extra charges begin to appear because the salesperson thinks you will just accept them. Start with a low response and trade every concession for something specific that you value: “I’ll do this if you do that.”
If they reject your counter offer, give yourself time to think. Use a calculator to stall for a moment, if necessary. Then amend your proposal if it suits you, but make it tougher for them each time you do this. For example: “OK. I will pay your price if you agree 60-day payment terms.”
12. Keep cool – and quiet
When you sense a salesperson is keen to do business, put the pressure on them. Say, “What is your final offer?” and then shut up. The first person to break the silence will probably be the loser.
13. Find out when they’re weak
Salespeople have needs and targets too. These could be volume or price-based, and could be monthly or quarterly. And the same applies to their managers.
If you can find out when their target dates are, you could get some bargains. At these times, salespeople become desperate to win their bonus. Most sales targets are volume rather than profit or margin based. So, if you call near their deadline, you could squeeze a better discount if the volume of your order will push them over a target threshold.
14. Learn from the past
Think about what went well in negotiating previously with a supplier, and use it again next time. Conversely, remember how you lost out last time, and remember the salesperson’s approach. To stop them always doing the same to you, change your approach occasionally. Arm yourself with figures to rebut the claims they made last time. Rehearse the arguments you should have used then and will use next time. It always pays to take notes of negotiations to jog your memory of whom you dealt with, the prices agreed and the promises they made.
15. Pool your requirements
Don’t negotiate on the basis of one order, but pool as much of your requirements together as possible and negotiate on the basis of your quarterly or annual purchases.
Consider pooling your order with other businesses in your area or even in your industry. Bulk orders generally receive more generous discounts. In many areas, such as buying office stationery, this will not affect your competitive edge.
There’s more to life than price
In many cases, there are other factors that can be as crucial to your business as price. Reliable delivery, expert technical back-up, support for exhibitions and so on. Bear these in mind before walking away from a deal. If you do walk away, never burn bridges – always remain on good terms with former suppliers.
To sum up, remember that the most successful negotiators go into meetings armed with facts and figures. They know what they want, when to bow to the inevitable, what their limits are and what they can trade off. Equally, they leave their emotions at the door and are prepared to walk away if the deal is not right for them. They can do this because they know they have alternatives to turn to.
If you follow these tips all the time, you should improve your negotiating technique and ensure you always get a better deal for yourself.
CONCLUSION
Developing a good, easy-to-deploy method of evaluating suppliers is an important business competency that companies need to address. The methodology should be sound and the approach practical. Gathering data for the sake of data will not produce the return on investment in supplier evaluation. Most importantly, companies need to use the results as a means to foster communications, supplier development and performance improvement. This, in turn, will help companies reap the financial and competitive rewards of high performing key suppliers.
TLIR1407A
Manage suppliers
Diploma of logistics
HAPPY P RANA
SUPPLIER EVALUTION: BENEFITS, BARRIERS, BEST PRACTICES
Executive Summary
Measuring and understanding the performance of suppliers is critical to ensuring a well-functioning supply chain and to promoting a company’s own competitive position. Ultimately, improving the performance of key suppliers is the goal. With so much of the companies’ operations dependent upon the smooth flow of quality goods and services from suppliers, company can’t afford not to measure and understand supplier performance. It is important to Recognizing hidden cost drivers in the customer-supplier relationship. Determining a measurement approach and understanding the positives and negatives of various approaches. Making sure the evaluation approach is aligned with company objectives and culture. Identify actionable opportunities for supplier improvement for the future.
As companies increasingly focus on their core competencies and outsource a greater percentage of the cost of goods sold, their performance becomes increasingly dependent upon that of their suppliers. Companies that evaluate their supply base find they have better visibility into supplier performance, uncover and remove hidden cost drivers, reduce risk, increase competitive advantage by reducing order cycle times and inventory, gain insight on how to best leverage their supply base, and align practices between themselves and their suppliers. Companies pursuing supplier assessment commonly see more than a 20% improvement in supplier performance metrics (e.g., on-time delivery, quality, and cost).Still many companies say that they are not satisfied with their current supplier evaluation methods or are doing minimal evaluation.
The challenges to evaluating suppliers are numerous. Assessment can be costly, inefficient, and inconsistent. From an analytics perspective, many approaches are inadequate and unable to provide the insight needed to drive better decision making and performance improvement. The analyses miss qualitative input, do not identify the root cause of performance issues, and do not align customer and supplier practices. Many companies do not perform supplier evaluations beyond a few basic metrics. And many of those who do evaluate performance are not satisfied with their methods and results.
Understanding supplier performance can both prevent problems and facilitate performance improvement. By doing so it will it clear to Understand the value of evaluating suppliers (and the risks of not doing so), Recognize the hidden cost drivers in the customer-supplier relationship, Understand various supplier performance evaluation approaches and their relative merits and shortcomings. Get insight into best practices in supplier evaluation
WHY MEASURE SUPPLIER PERFORMANCE?
Increase performance visibility. Companies cannot manage what they cannot measure. If they do not know the facts about how their suppliers are performing, supplier management will be based on guesses about supplier performance. With enterprises managing hundreds and even thousands of suppliers, the supplier management process can be hectic and difficult to handle and many suppliers may remain untouched. To better manage the multitude of suppliers, it is critical to establish consistent benchmarks and goals to which suppliers can adhere.
Moreover, when companies measure suppliers, the simple act of monitoring them can drive performance improvement. By asking suppliers to meet specific performance goals, they not only will rise to the challenge, but often will aspire to surpass them—resulting in supplier improvement. This improvement can be even more dramatic when companies award additional business on the basis of suppliers meeting performance goals.
Uncover and remove hidden waste and cost drivers in the supply chain. The enterprise supply chain is full of inefficiencies. Some of these inefficiencies lie in the “white spaces” between organizations and can be improved by better communications between customers and suppliers. Others are a result of poor business practices at the supplier that can result in increased inventory, quality problems, higher costs, and slow deliveries. By more closely managing and measuring supplier performance, the enterprise can find more ways to help suppliers drive waste and inefficiency out of the business, resulting in higher-quality suppliers and lower costs. For example, rigorous measurement and verification of supplier quality can help companies eliminate incoming inspection, reduce supplier non-conformances, and remove the associated costs.
Increase competitive advantage by shrinking order cycle times and reducing inventory. Time is money, and by measuring and improving supplier performance and by reducing supplier quality problems, for example, a company eliminates wasteful steps in its own processes. For example, supplier materials can go straight to the point of use without incoming inspection because it is of the highest quality to begin with. Companies can reduce such wasteful costs and activities, typically caused by supplier glitches, as: additional inspections, extra freight charges, overtime (to catch up), safety stocks, obsolete inventory, buying from multiple sources (which reduce price leveraging), etc. When supplier performance gets to the level where materials are shipped more frequently and in smaller quantities straight to where they will be used, instead of stockpiled in a warehouse or on the floor “just in case,” order velocity increases and inventory is reduced as a result. The same goes for office supplies and MRO products. In fact, cycle time is a key indicator of business health. When the velocity of cycle times is high, then other aspects of a business are running smoothly.
Gain insight on how best to leverage the supply base. The better the quality of the supplier, the better the product or service the enterprise produces. By measuring supplier performance, an enterprise can set a certain threshold for its suppliers, thus leading to higher-quality results. When a company understands its suppliers’ capabilities and their levels of performance, it can better plan new products and services. The capabilities of its supply chain are, in fact, a large part of its own capabilities as a company. An example of when this knowledge is important is a make-versus-buy decision. If a company does not understand its suppliers, it may not know whether or not buying a product or service is better than producing it internally. As another example take deciding whether or not to outsource offshore. Understanding one’s local suppliers can help a company decide if they are capable of reducing total costs enough to outperform offshore suppliers. Also, suppliers can provide technologies to their customers that help customers develop new products and services that add revenue to the customer’s bottom line and enhance their position in the marketplace. Thus suppliers can help their customers add value to the top line in addition to helping remove cost from the bottom line.
Align customer and supplier business practices. Ideally, suppliers should run their business in alignment with their customers. They should share the same business ethics, expect similar standards of excellence, show commitment to continuous improvement, and be a cultural match. Take the lean enterprise or any high performance system for example, and consider how requirements of those for shorter delivery times, lower prices, and higher quality could actually have an adverse impact on a supplier who is not aligned with the customer. For example:
• In response to a requirement for just-in-time (JIT) delivery, a supplier might actually increase its cost structure by building up an inventory to meet the requirement rather than by making to order
• If the supplier starts inspecting quality into the product instead of building quality in, more resources are required, impacting the company’s cost structure. Quality could actually deteriorate in response to a requirement to improve it. And costs will rise, as more steps and resources are required to inspect and fix problems after the fact.
Another need for alignment is around having a culture of continuous improvement. A supplier who does not try to improve or for whom continuous improvement is not a way of life will not be able to keep up with its customers’ increasing requirements for better, cheaper, faster goods and services.
Improve Supplier Performance
The goal of supplier evaluation is supplier performance improvement. There is the positive effect on performance of simply measuring it. But supplier evaluation is most effective when it leads to continuous improvement activities and actual supplier performance improvement. This is where the return on investment can benefit both the supplier and the customer. The customer and supplier need to identify areas of opportunity for improvement that can positively impact the supplier’s business in the areas of cost, quality, responsiveness, etc and provide the customer with the benefits that improved supplier performance can offer. Supplier evaluation systems need to address both the traditional quantitative indicators such as quality, on-time delivery, and cost management as well as the underlying qualitative factors. The root causes of performance difficulties can be hard to uncover and require understanding the underlying business practices, cultural factors and even the leadership at the supplier. Follow-up activities, such as supplier training and development, and corrective actions to address supplier evaluation findings are the best ways to obtain measurable and positive results.
APPROACHES TO EVALUATING SUPPLIERS:
Questionnaires
A traditional approach to evaluating suppliers has been to send out questionnaires to gather information on suppliers. Paper questionnaires, even those sent electronically by email, present several challenges. First, they require knowledge of what to measure and how to measure it. Questionnaires are easy to construct poorly and hard to do well. Often, companies ask for information that is never really used or acted upon – data for the sake of data. Or, once collected, the information is hard to access. One person at the supplier, typically a quality manager or the business owner, fills them out, so it’s harder to get at the real situation at the supplier. Also, getting suppliers to fill out these documents in a timely fashion is sometimes a challenge.
Extracting and reporting on information from business systems
Some companies extract information from various internal business systems such as quality systems, ERP systems, financial systems, and internal surveys. Building internal scorecards by extracting data from a variety of sources can be a costly and complex undertaking. Data obtained this way may need to be scrubbed, aggregated and distilled to a supplier scorecard. Information from internal systems is useful and essential, but may have limitations. It typically requires human intervention and maintenance to be useful. Data integrity can be questionable due to internal issues, e.g., a shipment sits on the dock for days and the supplier is deemed “late”. Suppliers may take up time disputing the information. Of course, communications and follow up with suppliers about their results is critical to make this approach successful.
Site visits
Site visits can provide very effective insights and information in understanding a supplier. See to believing, especially if a company sends a well-trained, person or team, capable of doing such evaluations. Site visits must use both robust evaluation techniques and survey instruments to be effective. And the assessors must know how to do them so that they see beyond the veneer while being respectful of the supplier.
The biggest challenges to site visits are: the resources to fund and deploy them, good site visit evaluation tools, and a good follow-up planning process to ensure that important findings are addressed.
Certification to third party standards
Many companies rely on third party standards to vet out suppliers and may consider ISO9001 or QS-9001 registration, for example, sufficient. While these standards are a welcome addition to a supplier’s credentials, they may not be sufficient to ensure quality, performance, or alignment with a customer’s needs. Many companies find that they improve their processes simply by the act of documenting them. That is, they get a better view of how they run their business during the registration process and then take action to improve their processes. The downside to using third party standards as a source of truth about suppliers is that they simply do not ensure quality. Often companies spend more time documenting current procedures than improving either the procedures or their performance.
Supplier Evaluation/Performance Management Software
Third party software is available for creating supplier KPIs and scorecards, as well as for web-enabling the traditional site visit. It can provide a scalable and consistent alternative. Holistic solutions can link supplier evaluation results to other decisions and actions in the sourcing and supplier management process. And these solutions can help uncover root causes of supplier performance problems so that they can be more readily addressed. This approach is probably most suitable for mid to larger-size companies.
BEST PRACTICES
Measuring Supplier Business Practices
A large aerospace and defense company measures the deployment of best practices to determine preferred supplier status. This company used to send 5-6 assessors on a site visit to a supplier for a week, but is now using software tools to deploy the assessment. They now need 2 people for 2 days to accomplish the assessments.
Focusing on Supplier Cycle Time
An equipment manufacturer uses supplier cycle time as a key indicator of business health and partner status. Suppliers can drop a level in their overall ratings if their cycle time increases.
Transforming Data into Decision-making Information
Another manufacturer gathers supplier performance data from 25 systems into a data warehouse, where it is transformed into KPIs and shared with suppliers.
Gathering Internal Customer Feedback on Indirect Suppliers
A major pharmaceutical company continuously gathers feedback from internal surveys on 25 dimensions of supplier performance and internal customer satisfaction using an “always on” mechanism.
Negotiate with suppliers
Every business needs to buy in goods and services and these will often represent a large proportion of costs. So any reduction in these costs will have a significant and direct impact on profits. There are many ways you can achieve cost reduction, from supplier selection to better negotiation. When dealing with your suppliers, it is important to remember that you are usually dealing with salespeople who have been trained to get exactly what they want from you. . The best way to be is to control the relationship and to negotiate arrangements with suppliers
1. Ask
The first and most obvious way to get a better price is to ask for it, yet few people do. They just accept the list price. Get into the habit of asking, “What is my discount this month?” Some salespeople will just laugh and say “Good try,” but many others will respond: “I can only give you 10 per cent, I’m afraid.” That’s 10 per cent more than you had before.
Alternatively try asking, “What is your best price?” If they ask why, give any excuse: “Introductory discount for new customer”; “Loyalty discount for repeat customer”; or just be brazen and say you need a better price. You have nothing to lose.
2. Show potential
As a smaller business, it is easy to believe you are insignificant. This may be true, but there is no reason why you cannot act like a larger organization, particularly when it comes to buying.
Almost every business tends to follow Pareto’s Law, with 80 per cent of their trade coming from 20 per cent of their customers. If you are among the long tail of a supplier’s lesser customers, they are unlikely to spend much time wooing you or putting themselves out for you. Unless, that is, you can show you are a professional customer, are easy to do business with, pay promptly and have growth potential. Then you are the kind of customer that salespeople dream about.
3. Prepare
All good salespeople think about what they want from a meeting with a customer well in advance. They will know precisely what they want to achieve and how far from this target they will stray. Most buyers only start to think about what they want when in the meeting itself and so they are often unprepared to strike the best deal.
For a start, get hold of a price list. Then take a few minutes before a meeting to think about the prices and terms you need. Consider the arguments you will put forward to get these. What compromises would you be prepared to make? What can you offer them that they value, but which might cost you little? Can you barter? Even if you are short of time, setting aside just ten minutes to do this will give you invaluable negotiating muscle.
4. Calculate the pay-off
Part of your preparation should include various calculations. For example, if your credit terms are normally 30 days, what would be the pay-off if you were to pay cash on delivery, or even payment or part-payment with order? This may necessitate a bank overdraft. How much would that cost you? What discount rate would make this option viable?
On the other hand, what savings would you make if you were to negotiate 60-day credit terms? If you had to pay a slightly higher price, how much extra could you afford to make this a viable proposition?
5. Understand salespeople
The biggest danger when negotiating with a supplier is to think that the pressure is all on your side; that the salesperson can take or leave your offer, but that you have to accept theirs. Yet salespeople all have bosses to satisfy, targets to meet and jobs to keep. In a sense, they can be more hampered than you!
6. Be realistic
Salespeople know the price they want to achieve. So it is much easier if you too have a specific figure in mind. If they want £100 and you are aiming for £80, then you will probably settle somewhere in between, rather than at their price. But be realistic with your offer, or the salesperson will just think you are wasting time, and walk away.
7. Look for alternatives
It is also easy to imagine that (a) there is only one supplier you can deal with and (b) that supplier is doing you a favor by taking your order. If the former is true, you are in a dangerous position and should, as a priority, seek ways out of that corner.
In practice, though, there is almost always another supplier, and probably a better one. They might not offer exactly the same, but a substitute may prove more than adequate.
Learn about your supplier’s competition. For a start, contact the British Library Business and Intellectual Property Centre. It offers a comprehensive service to help you source products and services around the world. Also, try using the Internet to find alternative suppliers.
8. Use the competition
Salespeople make the best offers when they know they have real competition. So, having established that you have other suppliers who can step in, drop their names early into a conversation with your current salesperson. You may even want to make sure their competitor’s name is on the same page in your visitors’ book if you have However, keep the details of this rival offer unspecified as this puts the pressure on them to better an undisclosed proposal. They may start throwing in other concessions that you did not even know existed.
9. Seek other benefits
Things other than just price can be important to you. Before narrowing the discussion down to price, broaden it to find out what else the supplier might be able to do for you. They might be able to hold stock for rapid delivery, give you extended payment terms, or offer you lower delivery charges if you agree to let them deliver when it suits them.
10. Tap the marketing pot
While the salespeople may not be able to give you additional discounts, their marketing department may be able to contribute in other ways. For example, by co-funding an advert or mail shot, putting up a prize for a competition, or allocating space on their stand at an exhibition. Suppliers often have a separate marketing budget and are eager to find good ways to spend it.
The supplier may also be in a position to offer added value for your customers, like give-away or an extended warranty. Only after you have explored all these extras should you focus on price.
11. Haggle
Never accept the first offer. If you do, you may find that extra charges begin to appear because the salesperson thinks you will just accept them. Start with a low response and trade every concession for something specific that you value: “I’ll do this if you do that.”
If they reject your counter offer, give yourself time to think. Use a calculator to stall for a moment, if necessary. Then amend your proposal if it suits you, but make it tougher for them each time you do this. For example: “OK. I will pay your price if you agree 60-day payment terms.”
12. Keep cool – and quiet
When you sense a salesperson is keen to do business, put the pressure on them. Say, “What is your final offer?” and then shut up. The first person to break the silence will probably be the loser.
13. Find out when they’re weak
Salespeople have needs and targets too. These could be volume or price-based, and could be monthly or quarterly. And the same applies to their managers.
If you can find out when their target dates are, you could get some bargains. At these times, salespeople become desperate to win their bonus. Most sales targets are volume rather than profit or margin based. So, if you call near their deadline, you could squeeze a better discount if the volume of your order will push them over a target threshold.
14. Learn from the past
Think about what went well in negotiating previously with a supplier, and use it again next time. Conversely, remember how you lost out last time, and remember the salesperson’s approach. To stop them always doing the same to you, change your approach occasionally. Arm yourself with figures to rebut the claims they made last time. Rehearse the arguments you should have used then and will use next time. It always pays to take notes of negotiations to jog your memory of whom you dealt with, the prices agreed and the promises they made.
15. Pool your requirements
Don’t negotiate on the basis of one order, but pool as much of your requirements together as possible and negotiate on the basis of your quarterly or annual purchases.
Consider pooling your order with other businesses in your area or even in your industry. Bulk orders generally receive more generous discounts. In many areas, such as buying office stationery, this will not affect your competitive edge.
There’s more to life than price
In many cases, there are other factors that can be as crucial to your business as price. Reliable delivery, expert technical back-up, support for exhibitions and so on. Bear these in mind before walking away from a deal. If you do walk away, never burn bridges – always remain on good terms with former suppliers.
To sum up, remember that the most successful negotiators go into meetings armed with facts and figures. They know what they want, when to bow to the inevitable, what their limits are and what they can trade off. Equally, they leave their emotions at the door and are prepared to walk away if the deal is not right for them. They can do this because they know they have alternatives to turn to.
If you follow these tips all the time, you should improve your negotiating technique and ensure you always get a better deal for yourself.
CONCLUSION
Developing a good, easy-to-deploy method of evaluating suppliers is an important business competency that companies need to address. The methodology should be sound and the approach practical. Gathering data for the sake of data will not produce the return on investment in supplier evaluation. Most importantly, companies need to use the results as a means to foster communications, supplier development and performance improvement. This, in turn, will help companies reap the financial and competitive rewards of high performing key suppliers.
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Re: project on SMALL Scale industries & Marketing Management & Public
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Small scale industries is loosing their control over market. They have numerous reasons to it. First, they have very low budget for marketing and advertising. It is clearly said that there is no business then show business, unless and until you don't publicize your product it won't become brand well, that is the problem among small scale industries.