Posted on Friday, March 18, 2016 by Breelyn
There's an expression that should be applied to maintaining supplier relationships in procurement: only a fool trips on what's behind them.
Now to extend this thought: keep poor quality suppliers in the past, ensuring that future purchasing errors don't have a chance to wreak havoc on the supply chain. Any other course of action would be foolish. Without the right software to facilitate transparent and traceable vendor activities, an organization's supply chain can gradually, almost imperceptibly, weaken until it snaps.
How does this happen? Profit margins, global expansion, and outsourcing are prioritized over vital factors when the lure of low wages and minimal regulations becomes too strong. Even worse, many organizations are guilty of unethical practices and don't even realize it - something as simple as a lack of supplier screening has the potential to trigger legal problems. When procurement transparency means knowing about your supplier's supplier, it's easier for a formerly respectable company to become corrupt, albeit passively.
Recently, many MNEs have provided procurement professionals with poignant examples of ways to disregard a supplier's values, avoid supplier evaluations, and ultimately damage a company's reputation beyond repair. Below are examples that demonstrate the devastation caused by poor supplier relationships. To lift your spirits (ok, belatedly), these examples also highlight how using Tradogram could have prevented the disaster. A brazen claim, but when horse meat is involved, it's time to step up.
To date, the mobile phone industry has been using suppliers that source minerals from conflict zones. Additionally, cobalt, a key component in smartphones, is sourced from mines in the Democratic Republic of Congo that force workers to suffer inhumane conditions.
For more info: The Dark Side of World's Lucrative Phone Industry
The consequences of poor supplier relationships continues: the 2013 collapse of the Rana Plaza Garment Factory due to substandard building materials and construction-related violations killed more than 1000 people. The factory manufactured clothing for brands including Joe Fresh, Mango, Primark, and more. The most tragic part of this example is the fact that it could have been prevented with a method to ensure that safe working conditions were being maintained.
For additional information: Rana Plaza Collapse: Dozens Charged with Murder
Once again in 2013 the world had to suffer from shoddy suppliers. The Food and Safety Authority of Ireland discovered a range of frozen "beef mince" burgers contained a significant amount of horse DNA. The beef was being sold at large European retailers such as Tesco, Asda, and Aldi, among others.
For more details: Aldi Confirms Up To 100% Horsemeat in Beef Products
What better way to discover if your suppliers are raging monsters than to chat with them? With Tradogram's instant messaging and discussion room features, buyers and suppliers can have instantaneous and ongoing conversations. Most importantly, RFQs, RFPs, POs and Contracts can contain every mandatory term and condition for optimal supplier compliance. Buyers can also request that vendors provide a documented record clear of political conflicts and/or activities violating international law.
Have a supplier that isn't meeting your terms and conditions? You should have requested a third party certification to ensure compliance! You can also identify and eliminate poor suppliers with Tradogram's supplier evaluations. Incentives can also be offered to high-quality suppliers. For example, you can mandate that suppliers who maintain optimal working conditions for employees are given the majority of your business.
Finally, having an adaptable database of items would have prevented the "beef mince" from leaving an equine aftertaste. This feature ensures that the latest transactions and modifications are automatically noted in the system - determine all the specifics of your orders from under each item's profile. Additional files associated with each item can be attached to provide further clarity. No details are overlooked. Both buyers and suppliers are able to determine complete order requirements at a glance - what arrives is precisely aligned with expectations.
Your database of suppliers also facilitates effective relationship management. Information for each supplier can be logged in their profile, and updates are made in real-time so you can review all pending transactions, contracts, reports, and their corresponding performance score.
If all companies connected to these examples are smart, they'll learn from their procurement catastrophes and put more effort into developing relationships with ethical, high-quality suppliers. Regular supplier evaluations are a proactive way to guarantee your company interacts with only the best. No need to continue to stumble over past mistakes - proficient planning, explicit communication, and effective control guarantee minimum risk and optimum value.
Communicate to build a better buying system.