It's the Customer, Stupid

I recently wrote a post for the Spend Matters blog, “12 Reasons Why Supplier Scorecards Fail” (updated, with one additional reason than my original post  on this site in December 2008). There were some insightful comments, including one about the customer’s role in supplier performance success. Rob Handfield made a pertinent comment that it is often the customer who causes supplier performance problems and that customers should ask their suppliers to score their performance. This was the conclusion of a study that Dr. Handfield presented at the 2009 ISM Conference.  Some of the twelve customer competencies Dr. Handfield cited in the presentation were: ease of doing business, timely payments, communications, forecast accuracy and customer service (on the customer side).

When I began running the New England Suppliers Institute, a non-profit organization partially funded by Air Force ManTech through the TRP (Technology Reinvestment Program), the original mission was to improve the competencies of the supply base in New England so that manufacturers would be able to choose more local suppliers and thus help strengthen manufacturing base and the New England economy. But we ran into a snag. The customer companies also needed to improve their competencies as customers in order to get better performance out of their suppliers. We found poor practices rampant: less than lead-time orders being the rule rather than the exception, lack of communication about the simplest of processes (or no knowledge of whom to contact at the customer to resolve problems), goods that sat on the customer’s dock for days waiting to be accepted while at the same time dinging the supplier for a late delivery, long accounts payable cycles that threatened to put suppliers out of business. The list goes on. Then one day, one of our board members said, “It’s the customer, stupid.” (paraphrasing Bill Clinton’s campaign slogan, “It’s the economy, stupid.”). When our board members from customer companies were asked what percent of supplier performance problems were attributable to customer issues, they all agreed that the number was more than fifty percent. Needless to say, the supplier board members strongly agreed.

For suppliers to succeed, we realized that change had to occur on both sides of the customer-supplier equation, that it was not just a matter of getting suppliers to do a better job. Out of this realization we developed a process called the Supply Chain Management Improvement Process, designed to evaluate customer competencies in supply management from a process, system, and enabling behavior viewpoint and based upon a robust business model. Also, I wrote an e-book on the subject entitled, Improving Company Performance Through Supply Chain Management Practices. (Lionheart Publishing, 1999). And, we modified the mission of the New England Supplier Institute to include “improving business relationships between customers and suppliers” rather than focusing solely on supplier development and improving supplier operations. It was clear that supplier performance could not reach its potential without changes on the customer side of the equation.

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