Top100supplytips

© 2007 Procuri, Inc.

The 100 Greatest Supply Management Tips of All Time! - Vol. 1

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- The 100 Greatest Supply Management Tips of All Time!

The 100
Greatest
Supply Tips of
All Time!
Vol. 1

The 100 Greatest Supply Management Tips of All Time! -

Introduction
The title may be a bit sensational, but it got you to download this book. And the tips in
the coming pages won’t disappoint.
Gathered from real-world approaches used by supply management professionals, this
book is part of an ongoing project to foster the exchange of best practices and to elevate
the supply management discipline.
The tips found in the coming pages are not complex. They don’t require a huge budget,
CXO support, or years to deploy. Instead, they are practical, easy-to-understand
approaches – most of which you can implement today.
So, try a few of the simple suggestions. Share your favorite tips with your peers. Heck,
why not share a copy of this book?
If you use a tip, let others know how well it worked by sharing your experience on the
website that goes with this book: www.TopSupplyTips.com. And if one of your favorite
tips is not included in this book, share that too! We will include it in the next volume of
The 100 Greatest Supply Tips of All Time!
Note: Wherever you see this icon click to find more practical advice and
commentary – case studies, free downloads and links to other helpful content.

4 - The 100 Greatest Supply Management Tips of All Time!

Play fair

1

Clearly communicate requirements, rules of negotiation
and engagement, and award criteria to all suppliers.
Be sure to abide by your stated rules. And if you need
to make a change, share it equally with all suppliers.
Doing so will ease suppliers’ concerns and maximize
their competitiveness.

The 100 Greatest Supply Management Tips of All Time! - 5

2

Don’t recreate the wheel

Leverage the know-how of your solution provider to
learn the methods for effective sourcing, tools usage,
and contract and supply management. This helps you
avoid the mistakes made by early adopters and drive tool
adoption and program alignment.


Avoid conflict

3

Start your supply management transformation in high
impact, low friction areas, such as strategic sourcing, that
don’t require multiple functions and that drive measurable
savings. This allows you to demonstrate the value of your
program and fund additional improvement initiatives.


4

Hit the road

Supply management transformation is a continuous education
process. Top performers set regularly scheduled meetings with
functional, business unit, and corporate execs to reinforce
supply management initiatives, report progress, and solicit
support. These meetings also ensure supply goals are aligned
with stakeholder and corporate objectives.
Selling the Value of Supply Management

Download a free handbook on How to Make the Perfect Pitch for
Any Supply Management Initiative.


Train early and often

5

Market dynamics, goals, and functionality change
over time. Be certain to train and retrain users to drive
adoption and ensure consistent practices and results.


6

Honor top suppliers

It may sound trite, but there is strong evidence
that publicly recognizing top-performing suppliers
encourages performance improvements across the
supply base. Put some heft into the award by granting
top suppliers preferred status and first dibs on new
business. And showcase their company and
approaches at your next supplier conference.


Be an honest dealer

7

Manage internal expectations by clearly
communicating planned sourcing or contract
programs and expected results. Issue “deal sheets”
for each project to illustrate negotiation approaches,
pricing and market trend dynamics, and predictions
for results. Follow up with deal scorecards on
how you measured up to initial expectations.


8

Four is the magic number

To maximize competition, include at least four suppliers in
every negotiation.


9

Pay top dollar

There is a direct correlation between supply management
team salaries and the performance and value returned
from this function. Industry benchmarks report top supply
management organizations pay 30% higher salaries, but
outperform peers by more than 2X in process efficiencies,
effectiveness, and cost reductions.1

The Hackett Group

1


10

Divide and conquer

Strategically segment your supply base and align sourcing
and supplier management approaches by each segment.
Example: use more collaborative negotiations and align
product and business roadmaps with your most strategic
suppliers. Use competitive negotiations and low-touch
management methods for suppliers of commodity
items with little strategic value.


Create a crisis

11

Whenever possible, link your supply management
initiative to a top corporate goal or challenge. Complying
with the Sarbanes Oxley Act, selling into the white-hot
China marketplace, or mitigating corporate risk are good
places to start.

The Plus-Side of Crises

See how Qualcomm used Sarbanes-Oxley Act and litigation risk to
launch a successful contract and compliance management initiative.


12

Start your own news
network

Use multiple channels to communicate the intent,
approach, and results of supply management initiatives.
Channels include company newsletters, presentations
at company meetings, and “deal sheets” summarizing
sourcing projects or contracts.


Become multi-lingual

13

Gain support and respect from other groups by translating
the benefits of your supply management initiative into
their language. Example: When sourcing advertising don’t
highlight cost savings. Instead, tell marketing managers
how you’ll help ensure brand integrity, speed turnaround
times, and stretch their budget dollars.


14

Hang out with losers

Take the time to debrief with suppliers that fail to win
your business. The best will use your advice to develop
new capabilities and bidding tactics that meet your future
needs.


Keep your winners

15

Retain your top talent using these tips: maintain
competitive pay rates; keep your team’s work challenging;
create special projects for your top talent; develop training
and mentoring programs; plot a clear career path for team
members; and support work-life balance.


16

Comparison shop

Benchmark pricing and supply trends to determine the
right sourcing approach and to set realistic expectations
for returns prior to initiating negotiations. If accurate
price comparisons are not available, use commodities
indices to gain directional intelligence on market prices.


Get involved early

17

Involve sourcing and commodity experts in the new
product concept and prototype phases – before design is
locked down. This allows supply managers to identify
supplier innovations in the form of new technologies,
manufacturing methods, and processes that deliver quality,
cost, and time-to-market benefits.


18

Recruit strangers

Hire supply managers with unconventional skills and
experiences. Those with financial backgrounds can
advance new costing models and link supply performance
to corporate goals. Engineers can identify innovation and
alternative designs that meet both product and supply
goals. Technologists can also speed successful
deployments of supply management solutions.


Be responsible

19

Employ responsible supply strategies that foster fair
labor practices, supplier development, and diversity. Such
practices assure supply, often with unique competitive
advantages. They also provide a highly marketable status
as a socially responsible company.


20

Empower suppliers

Use a Web-based portal to empower suppliers to selfregister and manage their own profile, capabilities,
and certification information. This enhances buyer
productivity, mitigates risks, and helps prioritize tasks for
supplier qualification, development, and/or rationalization.


Incent the right behavior

21

To foster support for your supply management initiatives,
ensure measures and incentives are aligned to induce your
intended outcome. Example: To drive adoption of supply
or contract management technology, make usage part of
the individual buyer or contract manager’s scorecard. Link
the scorecard to employees’ personal bonus.
A Measured Success

Learn how Hess used metric and incentive alignment to get more than
95% compliance with its electronic supply management initiatives.


22

Go On Demand

On Demand or Software as a Service (SaaS) solutions
speed results and reduce risks – allowing you to focus
on supply improvements not software. SaaS users report
5X-10X lower TCO, faster deployment cycles, and more
frequent upgrades than installed software. SaaS users also
drive 28% more spend under management
than installed software users.2
2

Aberdeen Group


Reward good behavior

23

When negotiating new business, be sure to give “credit”
to preferred suppliers with good performance history. This
will motivate them to continue to keep up the good work
and will signal that new suppliers will need to work harder
to win such preferred status.


24

Fire your best people

Remove your best team members from their day jobs
and put them in charge of your most important supply
management improvement initiatives. This ensures
program success and helps retain talent.


Cut communication lines

25

Stop supplier attempts to subvert sourcing procedures by
cutting off unauthorized communications to influential
personnel. Use workshops with internal stakeholders
to reinforce the importance of maintaining integrity in
sourcing and supplier relations. Shut off new business to
suppliers that violate the policy.


26

Listen to your users

Use training programs to solicit stakeholder feedback on
process improvements or solution functionality changes.
This feedback loop secures stakeholder alignment and
improves program adoption and compliance.


Ensure currency

27

Have suppliers bid in your currency to reduce exposure
to currency fluctuations. Or share currency risk with
suppliers by negotiating tiered pricing in the seller’s
currency based on a mean price set at an agreed exchange
rate. Make adjustments to the agreed price (reductions for
unfavorable rate changes, increases for favorable
rate changes) as currency rates fluctuate.


28

Go old school

Gain insight into supply market pricing and availability
trends for specific categories by using traditional market
intelligence methods – with an Internet-age spin. Use the Web
to access public reports, annual reports, press releases, and
news articles to learn about technology breakthroughs, plant
locations, material specs, and capacities for specific
commodities, or even suppliers. Tap your personal
contacts for their own experiences and supplier
recommendations in the category.

Analyze before
auctioning

29

To determine which spend categories are ripe for
auctioning, ask four questions: Can you define clear
specifications for the category? Is there a competitive
supplier pool? Is the spending or unit volume significant
enough to be of interest to suppliers? Are you prepared to
change suppliers based upon the auction results? If
yes, then auction it.
Beyond Reverse Auctions

e-Sourcing involves much more than price-based reverse auctions. In
fact, auctions comprise only about one-third of all e-sourcing projects.


30

Choose Favorites

Channel your most complex sourcing or contracting
projects through a Center of Excellence (CoE) in which
a core group of experts or power users are trained on the
latest approaches and functionality. This ensures the use of
best practices and the delivery of faster and more consistent
results. Empower less-frequent or less-skilled users to
specify projects and to execute common tasks, such
as basic e-RFx, reverse auctions, or configuring
contracts from pre-approved templates or terms.

Buy lunch

31

Host periodic lunch-and-learn workshops to train team
members and other functional stakeholders on your
supply management initiatives – whether training on a
new application feature, showcasing results of successful
sourcing projects, or defining your supplier diversity
program.


32

Sell to suppliers

When rolling out new initiatives or technologies, educate
suppliers on the benefits they can expect and how best
to use your tool of choice. Example: With e-sourcing
projects, inform suppliers of the rules of engagement
for online negotiations, your selection criteria, and
award strategy. Better trained suppliers make more
competitive (and realistic) offers.


Define the rules of
engagement

33

To guard against post-event bartering in supplier
negotiations, use prerequisites and knockout questions to
ensure that suppliers agree to all conditions prior to the
negotiation and to avoid any surprises or disputes after
award.


34

Ask “Why Not?”

Don’t debate the “this-category-is-too-strategic/complex/
unique-to-be-sourced-online” crowd. Instead, make category
managers – and reluctant stakeholders – start from a position
of, “Why can’t this spend category be e-sourced?” This
discipline will ensure consistent and documented sourcing
methods are used for all spend and provide vital
insight into spending and market trends. Oh yeah,
it will also help you eke out 5%-14% additional
cost savings above what you could achieve offline.

Go East

35

Invite qualified suppliers from low-cost Asian regions
– particularly China – to participate in negotiations.
Experience shows that their participation drives other
suppliers to bid more aggressively.


36

Make supply management
a team sport

There is a direct correlation between the involvement
of non-purchasing stakeholders in the sourcing process
and the contract compliance rates. Other functions can
also offer invaluable insight into cost drivers and market
dynamics.


Get aligned

37

Ensure sourcing and supply management goals map
directly to corporate and financial objectives. Whenever
possible, piggyback on major corporate initiatives – such
as Sarbanes Oxley Act compliance – to ensure support and
funding for your own goals.


38

Use your own paper

Use (and reuse) your own standard form contracts
whenever possible. This maintains consistency, reduces
risks, and improves negotiation leverage with suppliers. It
also streamlines contracting cycles.


Run two online
sourcing projects

39

Prove the impact of supply management improvement by
conducting an e-sourcing project. Enhanced transparency
and competition – fueled through e-sourcing – yield an
average of 14% cost savings for first-timers. Users report
full ROI within two to four events.

Early Wins, Long-Term Results

View a case-study on how Sun Microsystems used e-sourcing to beat its
savings goals by 256% in its first year of deployment.


40

Close back doors
behind you

To speed success of new supply or contract management
initiatives, shut off legacy processes or systems that could
enable reluctant stakeholders or suppliers to circumvent
your new ones.


Look inward before
outsourcing

41

Document and standardize processes before outsourcing
spend categories or procurement activities. Also, design
and build your internal capabilities to manage an
outsourcing service provider relationship – prior to the
selection process. This helps define expectations, gain
alignment, and mitigate risks and failures later on.


42

Get auction clairvoyant

Predict auction success by requiring suppliers to complete
a detailed pre-bid RFP response. This guarantees that
suppliers fully understand your requirements. It also
serves as an early indication of the auction results.


Work both ends of the
organization

43

Deploying a supply management initiative requires
securing support from top executives as well as frontline
employees. Execs can provide the budget, resources,
and policy changes required to get a program going. But
success will be determined by stakeholder support and
adoption.


44

Come armed with facts

Top executives, particularly CFOs, want to know how
your supply management program is going to hit the
bottom line and when it’s going to get there. Ensure
you have visibility into spending, compliance, and
performance data. Report how this intelligence links to
corporate goals and profits.


Make it personal

45

Ensure senior executives understand supply management’s
contribution to your company’s profits, performance, and
competitive edge by illustrating how supply management affects
their personal lives. Use examples of how supply constraints are
increasing prices for luxury items, like golf clubs. Or how supply
risks, such as counterfeiting, are impacting their showpiece
purchases like fine wines, cosmetics, or hand bags. Or how a
limited understanding of personal spending at home is akin
to limited visibility into corporate spending at the office.

46

Check on suppliers
well being

Measuring company supplier performance only tells
half the story. Run periodic checks on the financial and
business health of your suppliers – pay attention to any
liens, legal judgments, or restructurings. This information
is available from third-party information aggregators for a
fee. But you can get started by setting news alerts
on your top suppliers using any of the leading
Web search sites.


Create your own
opportunity

47

Volunteer to take charge of your company’s e-supply
initiatives. Technology project management skills are among
the most in-demand in the supply management field. If
there is no existing job description for this role, create one.
Be sure the role has responsibility for assessing existing
infrastructure, defining solution requirements, leading
solution selection, and heading training and
deployment. If you lack skills to fill these shoes,
educate yourself on supply management technology.

48

Make every day
Secretary’s Day

Woo executive assistants and administrators. They often
select vendors, issue requisitions, and make purchase
decisions on behalf of business executives. Getting them
on board early drives compliance. Admins also offer a
wealth of insight on buying preferences and vendor and
system performance.


Put risk management
on autopilot

49

Reduce your exposure to supply risk by setting automatic
alerts when key supplier milestones – such as insurance
renewals or critical certifications – are coming to term.
Issue reminders to suppliers well in advance of the term
date and track their compliance. Some supplier portal
and performance management systems offer this
capability. If not, set the alerts in your desktop
calendar.


50

Go back to school

Enhance the skills of your supply management squad by
partnering with a university. The top supply management
schools offer executive training programs, and most will
customize curriculum to meet your group’s needs.


Give frequent report
cards

51

Establish standard, easy-to-understand metrics for
measuring supplier performance. Share performance
scorecards with suppliers frequently, giving them ample
chance to refute and improve their scores. Research shows
companies that openly share scorecards with suppliers
drive greater performance improvements.
The Benefits of Sharing

Learn how the nation’s largest financial institution has improved
performance and lowered costs by automating supplier registration,
scorecarding, and corrective action management.


52

Solicit feedback

Top performers use 360-degree performance reviews,
actively soliciting supplier opinions on how they
rate as a customer. Some areas of evaluation include
communications, payment, and responsiveness. Such
ratings help buyers understand where to improve and
provide early warnings on problem supplier
relationships.


Harvest supplier
innovation

53

Establish formal channels (such as a Web-based portal)
and procedures to receive, evaluate, implement, and
measure results of cost-reduction or improvement
suggestions from suppliers. Improvements can come in
many forms, including design alternatives, inventory
consignment, automated invoice reconciliation,
and payment.


54

Share gains with
suppliers

If a supplier provides a cost-reduction or improvement
suggestion that is successfully implemented, share a
portion of the savings (preferably half) with the supplier.
This will encourage suppliers to share proactively,
contribute ideas that eliminate costs, and provide joint
competitive advantage.


Get on the MA squad

55

Elevate your status by helping to assess the synergies of
your company’s merger and acquisition targets. Nearly
60% of the hard-dollar impact of any MA deal comes
from supply management improvements. Assess spend
aggregation, supplier rationalization, and part-reuse
opportunities for a more accurate valuation. Get
involved early so your CEO knows the impact
supply management can contribute to the deal.


56

Get classified

Automate spend data classification to gain detailed insight
into spending and to increase accuracy and frequency of
spend analysis. This can uncover hidden opportunities
for better spend leverage, compliance, and supplier
rationalization.
The Power of Spend Visibility

Learn how a Global Healthcare Company used automated spend-data
visibility to improve strategic sourcing performance and achieve over
$250 million in savings.


Finance your future

57

Enlist your finance organization for help crafting policies
and provide support to drive contract compliance.
Have finance validate supply savings and track policy
compliance. If possible, get finance to remove savings
from business and functional budgets.


58

Find hidden experts

Get a crash course in new spend categories from
functional stakeholders who understand cost drivers
and innovation in those areas. Examples: Tap IT for
software and hardware tips, or ask Marketing to aide
your advertising or print buy. You bring the negotiation
knowledge…and the lunch. You’ll find new cost
savings, increase spend under management, and
improve compliance.


Teach your suppliers well

59

Share your sourcing and supply management expertise and
systems with your key Tier 1 suppliers. This approach can
increase your visibility to sub-tier supply costs and risks.
It can also arm your supplier partners to drive best-value
sourcing and cost reductions across their own supply
chains.


60

Establish a Co-Op

Aggregate spending or share contracts with your suppliers.
Allowing suppliers to purchase certain commodities or
parts at your preferred rates can dramatically lower your
supply costs. Likewise, some suppliers, such as contract
manufacturers, often secure better deals than you on
certain parts and components.


Be the middle man

61

Leverage your volume to buy commodities/parts at a
lower price and resell to supplier partners to reduce total
product/supply chain costs. This buy-sell arrangement can
not only lower your supply costs, but if managed properly,
can even let you turn a profit on the resale.


62

Get suppliers on your
design team

Secure a spot for your most strategic suppliers early
in your product design phases. This ensures you are
designing the latest product and manufacturing innovation
into your products. It also guarantees that suppliers have
the capabilities and capacity to support your new designs.
Early supplier involvement has been proven to
reduce costs and speed development cycles.


Share risks with
suppliers

63

Ensure that your contracts include clauses to have
suppliers share risks in areas of payment terms, currency
fluctuations, capital investments, and freight surcharges.
This will not only reduce your exposure, but also create
true supplier partnerships.


64

Partner with logistics

Transportation, handling, and tariff costs range from
13% to 24% of the basic price of imported materials and
parts. Tap your logistics team (or third-party forwarders
or brokers) to monitor shifting harmonized system codes;
tariffs; transportation, drayage, and handling costs;
and cross-border regulations. Ask how to lower
these “total landed costs” and dodge tariffs by
rerouting goods or postponing assembly until
after crossing borders.

Get a green thumb

65

Incorporate environmentally responsible practices in your supply
strategies, such as use of recycled materials, sustainable energy,
and environmentally friendly materials and manufacturing
practices. These efforts not only ensure compliance with tougher
environmental regulations, but also assure supply and mitigate price
increases for certain commodities. Environmentally sound sourcing
can also be used as a positive marketing tactic.
Sustainability for Profits

Learn how some of the world’s leading companies have used
environmentally and socially responsible supply practices to
mitigate risks, reduce costs, and boost profits.


66

Walk in your suppliers’
shoes

Prior to any negotiation, be sure to evaluate price and
supply trends for key inputs (e.g., commodities, parts, etc.)
into the products or services provided by suppliers. This
insight can help you identify key negotiation levers. It can
also help you set realistic expectations for supply savings.


Don’t be afraid of
commitment

67

Assess future pricing and supply market implications
to determine when to engage in long-term supplier or
hedging agreements. This will assure supply and lock in
preferred pricing, which is particularly wise in the face of
rising metals, plastics, and energy prices.


68

Make plans

Define a three-year roadmap for transforming your supply
management organization and performance. Be sure
to include measurable milestones as well as resources
(budgetary and otherwise) and policy changes required
to achieve them. Where possible, link your objectives to
those of the business. You may not achieve all you
plan, but you’ll get more accomplished (and more
respect) than without one.


Give suppliers more
responsibility

69

Reduce costs and exposure by adopting alternative
business relationships with your top-performing suppliers
or for suppliers in categories where you lack expertise.
Options for the former: Move from buying piece parts
to having suppliers provide sub-assemblies or complete
assemblies or establish a joint venture. Options
for the latter: consignment inventory, thirdparty logistics, or integrated supply.


70

Hold an open house

Make a practice of visiting successful supply management
organizations at their locations. Ask for a presentation
of their organizational structure, training and supplier
development programs, key performance indicators, and
technology approaches. Be sure to return the favor by
hosting others at your location.


Mix centralized
decisions, with local

71

When embarking on a supply or contract management
improvement initiative, strive for centrally defined
processes and global spend leverage with geographically
distributed support and execution. This matrix or “centerled” model provides the benefits of standardization while
supporting the nuances of individual businesses
and regions. It also meets less resistance than
centralized command and control.


72

Make connections

When sourcing from low-cost regions, foster frequent
interaction between suppliers’ quality personnel and your
engineers. This helps ensure quality and can speed the
ramp up process.


Reap what you sow

73

Supply and contract managers focus considerable effort on negotiating
the best deal, but many times, they overlook procedures for ensuring
compliance after the deal is done. Get stakeholder involvement (and
compliance commitment) at the beginning of the sourcing process.
Establish channels to inform stakeholders of the pricing and terms of the
new agreement and how they can order from it. Monitor transactional
and pricing compliance with the contract. Report compliance
performance on a periodic basis – fingering areas of nonconformance. (If possible, get execs to put teeth in compliance
policies.) Be sure to align your team’s incentives to actual
contract compliance – not just negotiated savings.

74

Call on Superheroes

Establish resident experts or “super users” within certain
businesses or regions to encourage program and system
adoption and support other users. Super users also ensure
consistent approaches and system usage across the
organization. Keep super users fully informed of program
progress and trained on the latest features of your
supply or contract management system.


Set limits

75

Speed adoption and support for supply or contract
management initiatives by establishing policies or dollar
value thresholds to encourage compliance. Example:
Mandating e-sourcing use for sourcing projects above
a certain dollar volume threshold ensures that online
sourcing methods are used for projects where they
can have the most visible impact. Early wins
on big ticket items can help gain support for
expanding the program to all spending.

76

Watch for sour grapes

Constantly monitor online auction events to discourage
suppliers with no chance of winning from sniping,
phishing, or extending bidding to force more concessions
from their competitors. Remove suppliers employing such
tactics from future business opportunities.
Keep it Clean

Learn how to keep suppliers from derailing your supply management
initiatives from the real-world experiences of one of the world’s leading
food and beverage companies.


77

Speak CFO

Link supply improvements to the metrics that matter most
to your CFO: Return on Invested Capital (ROIC) and
Earnings per Share (EPS). ROIC is earnings divided by
the total capital invested in the business (i.e., long-term
debt plus stockholder equity). EPS is net income divided
by the number of outstanding common shares.3

Straight to the Bottomline

3


78

Don’t neglect your
soft side

Wring hard-dollar impact from “soft cost” savings.
Automating sourcing, contracting, and procurement
execution shortens process cycles 50%-70%. Cycle
time improvements free you up to apply strategic
sourcing or contracting principles to more and a wider
range of spend. Example: For a company with $1
billion in annual revenues, cycle time savings
from e-sourcing alone can yield more than $42
million in additional hard-dollar savings.

Avoid late fees

79

Speed invoice matching and reconciliation to take
advantage of those early payment discounts you spent so
much time negotiating. Depending on their cash position,
suppliers may be willing to offer additional rebates
(beyond those contracted) for earlier payment.


80

Outsource the energy buy

Deregulation added complexity to the already complex
energy buy. While larger companies often hire their own
energy experts on staff, other businesses should look
to energy management firms to help design purchasing
strategies (like hedging) that minimize risk, negotiate with
potential energy providers, or organize buying
pools to get volume discounts on energy.


Take it off

81

Work with internal stakeholders (marketing, engineering,
and logistics) and suppliers to reduce packaging, including
plastic films, filler, and paper. This simple move not only
cuts packaging costs but also can lower your inbound and
outbound transportation and waste management bills.
(It’s good for the environment too!) Also consider
shifting from disposable to reusable pallets and
containers. And if cost- and durable-effective, use
recyclable materials.

82

Know your alternatives

Identify alternative suppliers, substitution parts or materials at
the outset of each new sourcing project. You may not award
them any business, but it’s good to have a record in case
there are problems with your primary supplier, or if a certain
part has become obsolete by the manufacturer or regulatory
changes. Substitution planning can also mitigate the risk
of volatile pricing or supply shortages.
Risky Business

Learn how to assess, mitigate, and respond to a wide range of supply
risks – from price volatility to natural disasters.


Change a light bulb

83

Replace incandescent bulbs with energy-saving fluorescent
lights. This simple swap can cut the cost to light your
buildings by up to 75%.


84

Take in a show

One of the quickest ways to catch up on the latest supply and
contract management best practices and technologies is to attend
an industry association’s annual conference. These shows are
jam packed with instructional sessions led by peers and industry
experts. (And you can earn professional credits for attending.)
They also provide a venue to compare most available
technology solutions. They are great places to network
too. (Vendor-run forums are also helpful; but be
prepared to hear their sales pitch.)

Don’t forget to evolve

85

The only thing worse than not measuring performance is
tracking the wrong attributes. Revisit supplier performance
metrics on a periodic basis to ensure that measures reflect
changes in your company’s requirements and new supply
market dynamics and risks.


86

Embrace diversity

Develop or expand a supplier diversity program. Start by
securing executive leadership for your program. Link diversity
initiatives with company goals for social responsibility. Establish
a supplier diversity council of execs across businesses. Expose
existing minority suppliers to new business opportunities
and help these suppliers develop new capabilities. Find
new diversity suppliers at trade shows or by joining
minority organizations. And give annual awards to top
performing minority suppliers.

Use explicit language

87

Clearly define the terms of sale for all your supplier contracts.
Be explicit about the freight payment options. If you have
the clout, negotiate F.O.B. (“free on board”) Destination,
meaning the sale is finalized when you sign for the goods
on your dock. This lowers your risk and your cash flow. If a
contract does not mention any terms, F.O.B. Origin is
often assumed, meaning the title to the goods passes
to the buyer the instant the driver picks them up at
the supplier site.

88

Shoulda, woulda, coulda

Adopt should-cost standards for parts and assemblies
by analyzing part design and supplier operations. This
enables fact-based negotiations and uncovers ways to
offset increases in raw material prices or engineering costs
with savings in other areas like manufacturing or labor
efficiencies and SGA. Suppliers benefit
through more efficient operations.


Set (and reset) the
bar high

89

Set annual goals for supplier cost-reduction or innovation
contributions. Make this goal part of suppliers’ overall
performance scores. Give top contributing suppliers first
crack at new business opportunities.


90

Enter China gingerly

It’s easier to get into China than to get out if things go
awry. When launching a China sourcing program, use a
phased approach to ensure success and minimize risk.
Personally train suppliers to understand your business
requirements, methods, and objectives. Tap an experienced
third-party partner with local presence to help
onboard and develop suppliers.
Lost in Translation

Learn how to navigate the challenges of sourcing and managing
suppliers in China from one of the world’s foremost experts.


It all boils down to spend
under management

91

If you had to use a single metric to measure supply
management effectiveness, make it spend under
management. Spend under management is the
percentage of your company’s total addressable spend
that is managed using approved strategic sourcing and
compliance procedures. Why is this so important?
Each new dollar brought under management
yields $0.05 - $0.20 in savings.


92

Know your market share

Measure spend under management on two axes: First, what
is the corporate-wide sourcing and contract compliance
for each spend category? (Example: Compliance for your
preferred airline was 82% last quarter.) Next, what’s
your “market share” for a given department? (Example:
90% of the marketing department’s spend is under
management of your standard sourcing and
compliance procedures.)


Go on a diet

93

Apply lean principles to sourcing, contracting, and
supplier management processes. Eliminate non-value
added tasks, such as redundant data entry. Automate
and streamline time- and labor-intensive processes and
communications, and embed standard policies, processes,
and controls in all aspects of supply management.
Use repeatable sourcing and contract templates to
enhance productivity and knowledge transfer.


94

Encourage counter offers

Enable suppliers to bundle and un-bundle line items or
provide alternative offers. This helps you determine the
overall best value allocation. It also allows suppliers
to differentiate on more than just price. And because
suppliers are the experts on their products, they may
suggest innovative technologies or processes
that you may never have considered.


Start off on the right foot

95

Work closely with new suppliers to codify performance
requirements, measures and methods, and continuous
improvement goals for costs. Give suppliers advanced
(preferably On Demand) visibility into their performance.
Link performance tracking with supplier development and
new business opportunities.


96

Develop a marketing plan

Take a page from Marketing’s book and develop standard
procedures and tools for communicating your supply and
contract management plans – and for trumpeting your success.
Some tactics: Brief business executives regularly on your
initiatives, results, and how they impact their business. Pen a
regular column in the company newsletter on the value
of supply. Publish case studies on your most satisfied
(internal) customers. Issue deal sheets for each sourcing
and contract project, defining your approach and results.

Invest in suppliers

97

Identifying supplier performance problems is easy.
Resolving the issue quickly is another matter. Top supply
groups take matters into their own hands. Dedicate tiger
teams to work with key suppliers to quickly assess the root
cause of a problem and make recommendations on how
to fix it. In most cases, the investment is less costly
than switching to a new supplier.


98

Digitize your contracts

The number one challenge to spend compliance is poor
visibility into contracts. Digitize and store at least contract
header information in a searchable repository. This enhanced
visibility can dramatically improve contract compliance,
minimize risks, and provide leverage to force policy changes.
A Contract Story

View a case study on how contract management automation helped
one of the nation’s largest health-insurance companies avoid risks and
business disruptions, improve visibility and compliance, and reduce
administrative cycles and costs.


Pass this eBook along

99

E-mail this book to a colleague or two (or more!).


100

Share your wisdom

Do you have favorite supply management improvement
tips of your own? Share them at The Top 100 Supply
Management Tips of All-Time! site here:
www.TopSupplyTips.com
Your wisdom will live on. And it could make
it into the next volume.


Top100supplytips

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