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Procurement Supplier Management

Dealing with supplier approaches: Suppliers can and do approach all parts of an organisation and yet most members of staff have no trainin... thumbnail 1 summary
Dealing with supplier approaches:

Suppliers can and do approach all parts of an organisation and yet most members of staff have no training about how they should respond.

There are clear benefits in ensuring that supplier approaches are handled well. Good handling can ensure that the benefits of new products and services are brought to the attention of the right person in the organisation. It can protect the organisation, keep work to a minimum, avoid souring relationships and add to the organisation's reputation for efficiency and good management.

Approaches are usually made about either existing products and services or about new products and services. Approaches are made by new suppliers or existing suppliers. The handling of the approach depends on whether it is an existing or new product or service and whether it is an existing or new supplier. Within this framework, the approach might range from a solicitation for new business to a complaint which could have legal consequences. Obviously different approaches need different responses.

Most organisations also neglect the opportunity which supplier approaches give to the purchasing organisation to condition suppliers. This is partly because many of the people whom suppliers approach are totally unaware of how they might condition a supplier and what the benefits might be to their own organisation. Good conditioning can help put the relationship on a sound footing from the procurement point of view and put the purchasing organisation in a strong position in future negotiations with the supplier.

Pre-qualification is a part of pre-contract supplier appraisal. It is an essential step to deciding whether a supplier is sufficiently capable of timely and quality supply at an acceptable price. If the supplier meets the pre-qualification criteria, the supplier may be invited to tender or negotiate for the purchasing organisation's business.

There are two steps to pre-qualification: finding suppliers and verifying that they are suitable.

Finding suppliers: This is the identification of possible sources of supply. There are various databases available to do this as well as the internet and the more traditional sources. It is normal in this stage to carry out a basic check to ensure that the identified potential supplier has the capability to actually supply e.g. the supplier can supply plastic mouldings but can it supply the type of mouldings which we require?

Verifying suppliers: The extent of any verification exercise depends on whether the requirements to be purchased are essential to the organisation or whether they are basic purchases of non essential requirements. Essential requirements mean that the purchasing organisation is heavily dependent on the supplier and a more extensive pre-qualification is required. This is not to be undertaken lightly as it is both expensive and time consuming to do.

Before undertaking a pre-qualification, it is important to identify the aspects of the potential supplier which need to be verified. It is also important to identify how the aspect can be verified. This involves setting a standard and then scoring the supplier against this standard.

Managing Suppliers and Contractors

Supplier Performance Measurement