One of the key elements in the supply chain cycle is that of supply value management (SVM). Think of SVM as the final step in sourcing and contracting key supplier partners. SVM is a continual process that helps drive the relationship to a more sophisticated level. The goals of SVM is to achieve continuous improvement between buying and selling organizations and to emulate or to set the standard for best practices in the industry.
What may start out as a fairly basic buyer and seller transaction, can migrate into an integrated strategic partnering arrangement. SVM is the natural progression of the established service level agreements (as discussed in a prior blog). SVM is the process that defines the long term relationship though both formal and informal program review. Formal reviews consist of more strategic plans on a long term basis. Daily or tactical plans typically focus on day to day operational issues.
The SVM program focuses on the three P’s: partnerships, process and practices.
Partnership: Focus on those third party relationships that meets the buying companies’ objectives and culture. The latter is important in order to be effective in the operating environment. Although it’s not always achievable, all parties should strive for win-win outcomes. Of course, a strong business relationship is the foundation for any successful endeavor, which comes down to a single guiding principal for all, trust. This is achieved through accountability.
Process: This involves the use of pragmatic tools in order to accomplish desired outcomes such as an established governance structure which guides both the short and long term goals of the project. Process examples would include how performance is measured and tracked. Communications processes also establish the cadence of meetings and who should attend these meetings.
Practices: This includes relationship development, team building, decision making, problem solving capabilities, communications and of course, implementation. Implementation requires an honest assessment of how the program or project is running. It’s this assessment that develops the “gap” punch list. This punch list should then be classified into meaningful categories such as “quick wins” or easy projects, medium complexity and lastly, complex or long term gaps. Some of these more complex gaps may require change management for either one or both partners.
Given the ever-present time factor, it’s easy to move onto the next project under the false sense of security that the contract is signed and will just take care of itself. However, who wants to be in a position to get that dreaded call or email and have to explain what happened or why the results are so off target? That is exactly what supplier relationship management is designed to address. Organizations that have formal SVM programs establish more efficient operational processes, improved customer satisfaction, higher responsiveness to demand changes and higher quality outputs.
