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Supplier Fitness Program In Procurement Strategies: Seek joint advantage with supplier H5-Kearney

time:2020-03-13 browse:2285次

Supplier Fitness Program

Fitness is just as important for a supplier partnering up with a customer as it is for an employee hiring himself out to an employer. In sports, fitness programs have the goal of burning excess fat, building muscle fiber, and achieving a sound and balanced physique . Many people engage a personal trainer to design a fitness program matched to their individual needs and using the correct approach.

The same is also true of a supplier fitness program, which finds the right strategies and employs the right levers, identifying and implementing cost reduction potential, to help a company ’s supplier eliminate weaknesses and become more competitive.

In contrast to supplier development, which primarily strives to create new suppliers or increase the use of existing smaller suppliers, supplier fitness programs focus on existing large suppliers. The object is to improve the supplier's cost position. This encompasses numerous measures that have a direct or indirect impact on costs and are developed and implemented through a structured program:

Preparation and selection phase: First, appropriate suppliers need to be chosen for the program. (Supplier fitness programs are a complicated matter and cannot be committed for all suppliers—consider how complex this would be for an industrial company with some 8,000 group suppliers, for example.) Then sector-specific questionnaires need to be created, and internal and external analyses of product / process benchmark data undertaken. At the same time, visits to the supplier have to be planned. The aim of this preliminary work is to gain an understanding of the entire cost structure and product portfolio of the supplier.

Opportunity scan phase: Evaluation of the supplier initially means analyzing its processes, with a particular focus on procurement and production. After identifying the cost-cutting levers, concrete activities that can boost the supplier's fitness are devised, reviewed, and recorded. Each of these levers needs to be based on positively identified cost improvement potential.

Implementation phase: The measures are implemented in close collaboration between the supplier and the customer, initially in a pilot area. The pilot project is then successively extended throughout the supplier ’s operation.

Reporting phase: Implementation results and the consistency of implementation are kept under constant review. 

As many companies are not able to maintain the broad base of in-house expertise required for this activity, consultants are frequently called in at this stage to work on supplier fitness in joint client / consultant teams.