Purchasing Training ~ Who is Responsible for Your Supplier’s Performance?

by Omid Ghamami

Purchasing Training ~ Who is Responsible for Your Supplier’s Performance?Purchasing Training - Managing your Suppliers

I’ve been doing whirlwind business travel lately.   Malaysia, Turkey, Brazil, Canada, Houston and now I’m in Dubai.

I finished doing a keynote in one of these locations (I’m being intentionally cryptic), and like always, I spoke with a myriad of people during the break.

During that time, I had the most interesting discussion with a purchasing manager and his purchasing director.

They were having a problem with one of their most critical suppliers.  As I recall, it was a construction supplier.  The supplier was constantly delivering late, and it was having huge impacts to the business.

So guess what their question was for me?

They wanted to talk about insurance.  They were adamant that they needed to find insurance to compensate for the cost of cover (the cost of being made whole again) for supplier late deliveries.

Yes, for the failure of their suppliers to deliver on time.

The problem was, at least from their perspective anyways, that they called every insurance company they could find to get a quotation, and none of them would provide it.  They wanted me to help them out of this situation.

What kind of help?  They wanted help finding this kind of insurance, and they wanted me to point them in the right direction.  Specifically, they wanted to know which insurance company I could recommend.

They didn’t like my answer however, and that’s because I wasn’t intent on answering their question.

I asked them instead why their supplier wasn’t performing in the first place.  Then I asked them why they let their supplier’s poor performance become their problem.  Why should they insure someone else’s poor work product, especially when they were paying for the supplier to do the job right in the first place?

Supplier late deliveries are a symptom.  Getting insurance on a supplier performance problem does nothing to solve the problem.  In fact, it encourages the problem to get worse and only feeds the symptom.

My advice for them was to stop looking for insurance immediately and to start holding their supplier accountable for performance.  The performance they were *paying* for.

I also advised that they should put some liquidated damages in place in the contract so that the burden of remedy for poor performance shifts to the supplier, and so they have some motivation to perform.

But they didn’t like my answer, especially the more senior of the two.

Now if I viewed my job as a popularity contest, I might have caved and agreed with them, telling them what they wanted to hear.  But I can’t and won’t do that.  Our profession needs to get over these hurdles.  I have to tell people in our profession what they need to hear, not what they want to hear.

All of you need to go back and look at how you run your business and see if you are making your suppliers EARN the big fat PO they are getting every month.

Don’t be afraid to demand excellence.   It’s your right.

All of you have a parking lot full of suppliers dying to do business with you.  It is a privilege to do business with your firm, and you need to tell your suppliers this.  Don’t be arrogant, just be clear on the facts.  They need to know this.

Don’t ever forget who is the one with the money.  YOU are the one with the money.

YOU are buying performance results, and if suppliers aren’t delivering that, you need to get them to fix it or you  need new suppliers. Suppliers cannot take you or your money for granted.

The last thing you should do however is run around doing diving catches and making supplier performance issues your problem to resolve.

Purchasing pros, I’m counting on you to help move our profession forward.  Now go off and do something wonderful.

Be your best!

Omid G

 

 

 

 

 

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