JDA Second Quarter - the Challenges Ahead Part One By Bill McBeath Published on Aug 10, 2010 The people in an organization make or break it. A solid education program is one key strategy to sustain supplier relationships and maintain human expertise through periods of organizational flux.

One point is clear from our research: the people in the group can make or break the sourcing and procurement organization. The ability to work well with suppliers is one of the most fragile competencies in an organization. Finding strategies to sustain those relationships and maintain the human expertise through periods of organizational flux is critical. A solid education program is one of those key strategies.

Succession Planning: Transitioning Relationships

Supplier relationships are particularly vulnerable during times of change in an organization. Things may be working great with a certain supplier, but then a few good people are transferred or leave the company. Suddenly the company has lost a lot of techniques and knowledge and key relationships between the firms, so then they have to start all over. Especially in big companies, people are constantly rotating through, making it a challenge to sustain working relationships.

Turnover and changes also happen frequently on the supplier side. New people, new business strategies and priorities, mergers and acquisitions happen. Then, all of a sudden a lot of key contacts at the supplier are gone.

Either side of the relationship may change their priorities. For example, a new CEO comes in shifting the priorities from innovation to cost control, and that changes the game between the buyer and the supplier. What is needed is a systematic, disciplined approach to transitioning relationships and 'succession planning.' That‘s not always easy. Some key elements include:

• Learning from the Best Sales Account Managers: Good sales people are closely tuned into each major account they have responsibility for. They have their finger on the pulse of their customer's organization through numerous touch points—from senior executives down to informal conversations with admins and receptionists. This is their "early warning system." Buyers can learn from this kind of organizational intimacy and cultivate the same depth of relationship with key suppliers.

  During major changes, have a program to retain key people
• Know the supplier intimately (see “Learning from the Best Sales Account Managers” side bar.) Have your 'ear to the ground,' so if a big change is taking place you are aware of it early and are talking to them. Knowing 'where the puck is headed' allows you to plan ahead.  This level of relationship is especially important with key suppliers, and is usually not possible across the whole supply base.
• Train all sourcing and procurement people to the same base level, establishing common concepts and language.
• Cross training, to make sure that the organization is not crippled if a few key people leave, taking all their knowledge with them. This has the added benefit of creating a more flexible and adaptive work force that can be more easily shifted around, based on changing demands.

In Part Two of this article, we will explore the sourcing and procurement education approach of one of the most successful companies in the world, and use training on running competitive bidding as an example.

Note: Parts of this report were excerpted from our Report Series on Managing Supplier Performance.

To view other articles from this issue of the brief, click here.