Supplier of the Year programs, with their objective performance reviews, can lift business partner performance.Performance improvement is a key objective in the evolution taking place in retailer/supplier relationships where more retailers are embracing the business partner relationship concept with a change from suppliers being seen as just a “Vendor” to one where they are regarded as a “Strategic Partner”. The journey from “Vendor” to “Supplier” to “Key Supplier” to “Strategic partner” is being driven by three key factors: economic conditions and competition; the demand to provide consumer value and the need to better manage changing retailer/supplier relationships.

1. Improve Business Partner performance
with a Supplier of the Year program.
Supplier of the Year programs, with their objective performance reviews, can
lift business partner performance. The result is a Win : Win for both retailers and
their suppliers; with a focus on working together to fulfill consumer needs,
resulting in improved performance and a more profitable relationship.
Performance improvement is a key objective in the evolution taking place in retailer/supplier
relationships where more retailers are embracing the business partner relationship concept with a
change from suppliers being seen as just a “Vendor” to one where they are regarded as a “Strategic
Partner”. The journey from “Vendor” to “Supplier” to “Key Supplier” to “Strategic partner” is being
driven by three key factors: economic conditions and competition; the demand to provide consumer
value and the need to better manage changing retailer/supplier relationships.
Retailers Better managing the relationship
For their part, retailers are locked in an intense With the implementation of ECR, and evolution
competitive struggle for market share and, as a to a “Strategic Partner”, consumer products
result, are transforming their businesses and companies will need to focus on two key areas
requiring suppliers to add value in two core areas: to enhance product performance and improve
 Value chain: The supply chain is evolving into a their business with retailers:
“Value Chain” and is often defined as being:  Build a more agile, responsive organisation
“from the supplier’s supplier to the customer’s that efficiently and effectively responds to
customer”, identifying the key relationships and specific retail customer needs
value added processes along the way. With  Empower account managers and teams to
extended supply chains, particularly sourcing become more broad-based business
from low cost countries, and the need to be managers with a wider array of skills to drive
price competitive, best practice retailers are business value for both the retail customer
moving to Efficient Consumer Response (ECR), and the supplier.
a way of doing business that involves trading
partners working together to fulfil consumer Customer relationships have evolved from the
wishes better, faster and at less cost. “one point-of-contact” sales representative to
 Relationship: Retailers today do not just want “multiple points-of-contact” coordinated by a
their suppliers to sell them products. They want key account manager who orchestrates the
them to become “business builders”, helping to activities of a multifunctional team.
optimise the retailer’s profitability with a deep
understanding of their specific business needs,
as a “Strategic Partner”
Suppliers
For suppliers, today’s key account relationships are
becoming tremendously complex, with shifting
customer needs and growing polarisation in the
retail market, requiring greater agility and
responsiveness on the part of consumer products
companies. In this environment, suppliers seeking to
make the journey to become a strategic partner
need to work with their retailer partners to:
 Implement ECR
 Better manage the relationship, and To improve performance in this area, account
 Support Supplier Performance Management managers and teams must better understand
Efficient Consumer Response the retailer’s business and shift from a focus on
ECR is based on two key principles: “selling products” to a focus on “addressing the
 Consumer focus: A commitment to the belief customers’ business requirements”. They will
that sustained business success is about need to develop new skills which will enable
providing consumers with products that meet or them to address shifting retailer needs with
surpass their demands and expectations. greater agility and impact. To help them
 Working together: Maximum consumer value is perform this role more effectively, suppliers will
possible only when organisations work together, seek ways to provide their account managers
both internally and with their trading partners, to with a holistic view of all customer activities,
improve efficiency and effectiveness. including greater access to information.
"The greatest change in the way business is being conducted
may be the accelerating growth of relationships based not on
ownership, but on partnership” (Peter Drucker)

2. Supplier of the Year Program
Supplier Performance Management
SPM is absolutely critical in the “Strategic Partner” journey, using the process of regular reviews to measure,
analyse, and manage supplier performance and relationships to improve quality, reduce costs, mitigate supply
risk, and drive continuous improvement in supply value. The discipline of SPM is vitally important and recent
research by the authoritative Boston-based research company, the Aberdeen Group, confirms the intuitively
obvious conclusion that using SPM programs will produce higher value supplies.
Their research found that companies with SPM On-time
Improvement Price Quality Service
programs achieved performance improvement in Delivery
every category that was studied - an average SPM program 23% 23% 21% 21%
supplier performance improvement of more than 20%
across the four main areas - compared with those No SPM
that had no formal SPM program. 13% 11% 5% 17%
program
They conclude that “organisations that use formal supplier measurement programs outpace their peers in on-time
delivery, quality, service, price competitiveness, and other supplier performance areas”. Their recommendations
are:
 “Organisations that don’t have formal SPM “When you measure and communicate supplier
programs should investigate the benefits of performance regularly, suppliers improve their cost,
developing them. quality and responsiveness. Done in an automated,
 They should also develop standard supplier systematic way, performance improves dramatically,
performance metrics, involve suppliers and include in some cases by over 50%.” (Source: Aberdeen Group)
key internal stakeholders in the process.”
The “Strategic Partner” Journey
The journey from Vendor to Supplier, to Key Supplier, then a
“Strategic Partner” has four relationship stages:
 Early: “Red Zone”; Low performance ratings; New/occasional,
vendor; “Me too” products, price-based; Irregular
contact/orders; Strictly transactional relationship;
 Efficient: “Orange Zone”; Below average performance ratings;
Low consumer franchise; Some USPs; Regular contact (one
point); Moderate importance to retailer; Proficient in supply
and service; Delivers results;
 Effective: Average/above ratings; Proven products, solid USPs,
high value, ranked No. 3-5 in category; Moderate/growing
consumer franchise; Beginning ECR; Key account rep main
contact, frequent call cycle; Shares responsibility for results.
 Excellence: “Green Zone”; Highest ratings; A Strategic Partner
can be defined by a number of key characteristics, some are:
Suppliers are at different stages of
the journey to “Strategic Partner”. It
is important that retailers
understand where each key
supplier in their portfolio sits so they
might, together, develop strategies
for improvement.
SPM, with its regular performance
monitoring of KPIs, and reward for
excellence through Supplier of the
Year programs, is a vital tool to plot
the journey. It helps suppliers to
improve their performance and
reach their full potential and
cement their “strategic Partner”
relationship position.
“The purpose of investing in a relationship with a supplier is to improve their performance in fulfilling the needs of
the buying organization, thereby improving the buying organization’s performance and creating mutual benefit.”
(Chartered Institute of Purchasing & Supply)

3. Supplier of the Year Program
Supplier of the Year programs
Supplier of the programs are more than just a vote, or a popularity contest, they are about communication of
performance expectations and formal reviews, often two-way, to provide feedback on how suppliers are
performing against those expectations.
The five “Rs” of a successful Supplier of the Year program process are:
 Rate supplier performance – Your key stakeholders rate performance on your KPIs and key metrics;
 Report - Provide key stakeholders with reports on results, by supplier and suppliers with their own reports;
 Review - Meet with suppliers to identify strengths and prepare action plans to address underperformance;
 Repeat the rating, reporting and review process at regular intervals (2-4 times a year) to monitor progress;
 Reward excellence, and encourage competition, with Supplier of the Year awards and publicity.
In Australia, only a few retailers undertake formal annual, or quarterly, performance reviews with their suppliers,
using Key Performance Indicators and a formal rating process that looks at the entire business relationship.
Woolworths invite their 2000 plus suppliers to register for their Trade Partner Program each year. Suppliers are
assessed across various areas of Woolworths’ business such as Buying and Marketing, Finance, Replenishment,
Stores, eBusiness and more. Each product category is scored on a number of core criteria, KPIs specific to each
and a sales growth score. Quarterly reports are provided to suppliers and scores are aggregated annually as the
basis for awards, announced at a gala dinner.
Myer automatically enters all their 800 Trade Partners from their merchandise, concessions, supply chain and
business support areas into their Supplier of the Year program. KPIs differ by category, with merchandise suppliers
assessed quarterly on financial performance, delivery, in-store support and partnership. Top ranking results are
published quarterly and the annual awards are announced at a gala ball.
The Mitre 10 Supplier of the Year program involves key suppliers being reviewed by their 500+ stores, Business and
Category Managers and DC Managers. Suppliers are rated on their performance on fourteen KPIs in three areas:
DIFOT, Store Representation and Support and Business Partnership. Suppliers also undertake a self-assessment. Mitre
10 Managers receive a range of reports on their category and each supplier gets a full report on their ratings and
rankings, with detailed breakdowns by State and verbatim comments from store and National Office assessors.
Implementation
The advent of web-based, multi-user assessment software makes the operation of SPM easy. We can work with you to
implement a program internally, or we can manage the program on your behalf on a fully outsourced basis.
Our Performware™ platform is a suite of non-prescriptive
on-line tools designed to add value and drive business
partner performance improvement. Based on proven
Performance Management techniques, it allows
organisations to review their business partners and agree
on action plans to improve performance and to better
manage the relationships - for mutual benefit. Retailers
can assess the performance of key supplier partners,
using their own KPIs and importance weightings, with
input from multiple stakeholders from various
departments, and stores. Suppliers should also do a self-
assessment for comparison and as the basis for
engagement and discussion.
On-line survey
Performance KPIs are customised to suit individual
retailer needs. Nominated assessors receive
automated invitation emails with a URL link, login
details and password to access the survey. Assessors
rate supplier performance on each KPI, using a five or
nine-point scale with customised descriptors for each
rating point. Assessors roll their cursor over the scoring
balls and select the one that best indicates their
opinion. A pop-up comments box enables supporting
or explanatory comments to be fed back to the
supplier. There is also a section to capture overall
comments and strengths and areas for improvement.
“If you want to have early warnings about possible problems in a relationship and a way to surface issues and
address them collaboratively, you have to have a process to take the temperature of the relationship, comparing
its effectiveness up against agreed metrics, and then talking about the results.” (Vantage Partners)

4. Supplier of the Year Program
Retailer Reports
Reports are supplier specific, aggregated by
product category, in graphics and dashboard
format – with “Traffic light” colours highlighting
performance bands - plus detailed tables,
providing:
 Overall scores – In total and by KPI
 Ranking – Total, by category, key measures
 Rating comparison – Between:
o Product category
o Geographic region/State
o Assessor/stakeholder groups
 Scores comparison and benchmarks:
o Supplier of the Year score
o Supplier self-assessments - average
o Top quintile (20%) average
o Average all suppliers
o Lowest supplier score
 Supplier matrix – Two-dimensional charts
Supplier Reports
Supplier reports are individual, showing their own scores
and performance, benchmarked against all suppliers and
within their category, providing them with:
 Overall scores – In total and by KPI
 Ranking – Total, by category, key measures
 Rating comparison – Between:
o Geographic region/State
o Assessor/stakeholder groups
 Scores comparison and benchmarks:
o Supplier of the Year score
o Supplier self-assessments - average
o Top quintile (20%) average
o Average all suppliers
The main reasons suppliers support a Supplier of the Year
program are: Formal review – increased engagement;
Benchmark against peers – Competition; Improvement in
relationship – better understanding of expectations;
Recognition – reward for effort.
Summary
The journey from vendor to that of a strategic partner is not easy. It requires paradigm shifts by both parties,
particularly in attitudes, requiring openness and trust, information sharing and a commitment to meeting
consumer needs. But it is a journey worth making with the result a Win: Win, for both, of improved performance
and a closer and more profitable relationship. For suppliers, the Pareto principle will be a deciding factor: the 20%
that account for 80% of a retailer’s business will need to make the journey in order to join the club, whilst those in
the next level will need to show they can improve in order to force their way into the top 20%.
A Supplier of the Year program, with associated performance reviews will assist both retailers and suppliers to
objectively assess performance and drive improvement. Our experience is that suppliers are keen to participate in,
and contribute to the costs of, Supplier Performance Management reviews. They see value in the constructive
feedback and the ability to access results on-line to identify their weaknesses and put action plans in place for
improvement - resulting in higher levels of engagement and a closer business partner relationship.
Contact: Ph: (02) 9959 3815
Ron Latham, Managing Director Email: ron@lathamconsulting.com.au
Latham Consulting Pty Ltd Web: www.performware.com.au
41b Spruson Street, Neutral Bay, NSW 2089 www.lathamconsulting.com.au
"The greatest change in the way business is being conducted
may be the accelerating growth of relationships based not on
ownership, but on partnership” (Peter Drucker)