1. Identify critical commodities for development:
This is a portfolio analysis which states that not all organisation required to go for vendor development which are already using sourcing facilities from word-class vendors or the outsourcing ratio is very small to total cost or total sales so that investment in vendor is neither strategically nor financially justifiable.
So a corporate level executive committee should develop an assessment of the relative importance of all goods and services purchased by the company to identify where to focus any development efforts. This is called critical analysis of commodities related to vendor-development.
2. Identify vendors for critical commodity development:
After identifying commodities for development next step is to identify group of vendors of that particular critical commodity needed to be developed. A very well-known approach is parcto-analysis of existing Vendor performance.
Vendors who are failing to meet minimum performance objectives related to the quality-areas, delivery, cycle time, late-delivery time, total cost, service, safety or the climate and environment are targeted for analysis and appropriate development.
3. Formation of internal team:
Before approaching vendors and asking for improvements, it is important to develop internal cross-functional team for the initiative. Team members come from different departments like design, engineering, quality control.
4. Meeting with top-management of vendor:
After identify the suitable vendor for development and establishing a team, a team should approach the top management of vendor and establish key area decision related to strategic alignment, measurement and professionalism.
Strategic alignment not only means an internal business and technology alignment, but it should also focus on customer requirement. Vendor measurement includes a total cost focus, credibility and technical function. Professionalism involves setting a positive relationship, faster communication, trust development, provide expertise whenever required.
5. Identify opportunities for development:
At meetings with top management of vendor executive should identify area for improvement. Such areas are formed on the basis of customer’s expectations needs.
6. Define feasibility and viability:
After identifying the key areas for development opportunities should be evaluated in terms of feasibility and viability and it should include resources and time-requirements for carrying out the project and potential outcomes of this investment.
7. Joint agreement of project:
Once a potential improvement project is selected, both buyer and vendor must reach an agreement related to the specific measures that will indicate success. These measures may include percentage of quality improvement, percentage of cost saving shared, percentage of delivery or cycle time improvement, technology availability and system implementation stage. Once an agreement is reached, the project is rolled out hopefully according to schedule.
8. Monitoring progress of project:
Once a vendor development project has been initiated, progress must be monitored and tracked over time. This can be achieved by creating different monitoring means, process and standards for objectives, updating progress and in turn creating new or revised objectives based on progress till date.
9. Follow-up and modification:
By continuing the step (viii) we have required continuous follow-up and accordingly it may require modification in the original plan, additional resources, information or priorities depending upon the current situation at that time.
Advantages to implementing and executing a well-designed supplier development program, ultimately leading to better overall supplier relationships:
1) Full transparency between organization and supplier
2) Improved collaboration between organization and supplier
3) Streamlined and reduced sourcing activities and lead times
4) Improved quality, manufacturability, and reliability for new designs
5) Increased supplier responsiveness
6) Increased customer satisfaction
7) Increased awareness of supplier diversity
8) Increased visibility of full supply base to procurement, quality, and even management