Supplier development
An organization deliberate effort to improve it suppliers’ capabilities so that the supplier can be able to meet the buying organization’s supply needs. Supplier development has been defined as ‘the process of working with certain suppliers on a one-to-one basis to improve their performance for the benefit of the buying organization’ (CIPS). Supplier relationship and development begins by first prequalifying the potential suppliers.
The relationship has to be thought of as long term; working together to introduce new products; with continuous communications. This relationship has to be based on cooperation (partnership or distribution arrangement) as opposed to competitive and adversarial relationships. The organization can undertake to supplier development in various ways including pre-financing, share technical information, supplier technology and equipment, mentoring and capacity building or training.
Reasons for supplier development
According the CIPS (UK), there are a number of reasons for supplier development:
- improving supplier performance
- reducing costs
- resolving serious quality issues
- developing new routes to supply
- improving business alignment between the supplier and the buying
organisation - developing a product or service not currently available in the marketplace
- generating competition for a high price product or service dominating the
marketplace
Importance of supplier development to the supplier organization
The supplier will enjoy some benefits which will it to expand and become competitive:
- produce more units than they would have produced without support
- access modern technology
- have its staff capacity built
- get and use pre-financing with too much conditions usual faced when getting a bank loan
- improvement in lead times and delivery
Attributes of a good supplier
Barriers to supplier dev’t in developing countries
- Lack of (declining) trust by one party in another
- Poor communications a lack of constant feedback
- Lack of credibility of customers or buying organisations
- Lack of clarity and commitment to the relationship
- The feeling that the customer (who is helping with supplier development)is patronising the supplier
- Concealment of existing problems for one of the parties
- There was use of wrong performance metrics when evaluation and measuring the relationship
- The supplier and buyer have disagreed on the approach and ingredients of supplier development
- Limited resources to support supplier development by the customer
- There could emerge legal and fair competition issues when the customer a public entity (in public procurement, government laws favour competitive bidding)
