The old said: “there is no feast lasting forever”.  The same goes to the strategic supplier relationship. No matter how valuable a strategic “ventor alliance” may be at various points of the relationship, the relationship will change substantially and probably end somewhere along the way.  It is important to the exit strategy ready for every supplier.

 How to tell things are going wrong:  there are small signs indicate that the relationship is starting go wrong

• It takes multiple requests on either side before the action is taken. Early in the relationship, the request-to-action cycle is usually very short.
• It becomes necessary to make requests for items or service that used to be offered without asking.
• The buying organization starts to feel it is being “nickel and dimed” by the supplier.

Having a plan:  when seeing signs of a deteriorating relationship, procurement managers should begin assembling a list of all the areas that might be impacted from a major change in that supply relationship, besides the actual use of the product in its business or manufacturing application. Example areas can include: report generation, system changes, billing, order placement, EDI, invoice generation, funds transfer, inventory management services, technical support, Helpdesk services, warranty work, training services, ramp-up costs for supplier transition and many more. In the end, executives will want to see a detailed analysis of the economic and business impact of a switch, and a comprehensive transition plan that includes both the obvious and not so obvious areas of the business that will be impacted.

Have a new supplier in place: “you should not end a strategic relationship with one supplier until a new one, or a clear alternative strategy, is in place” , Lorrie Mitchell, a partner in consulting firm Mitchell Enterprises, recommends. “Alliance relationships create win/win opportunities and real partnerships. When the alliance relationship is good, it can be very, very good, but when it starts to get bad, you won’t be able to get out fast enough”.

Source: Procurement and Sourcing News: should breaking up be hard to do? — SupplyChain Digest

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This entry was posted on Friday, April 25th, 2008 at 2:05 am and is filed under Purchasing Practice, supply chain management, what's new. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.