Managing Supplier Underperformance

Ever been in that spot before where suppliers promise the moon but deliver cheese?😁

As procurement professionals, we rely on suppliers to deliver goods and services that meet our organization's needs and standards.

However, what happens when suppliers fail to meet expectations, leading to underperformance?

In this blog post, we'll explore best practices for handling suppliers' underperformance, accompanied by practical scenarios and prescribed actions.

📍Scenario 1: You're responsible for managing relationship with a critical supplier. However, you frequently encounter delays in product deliveries made by the supplier.

What To Do: Don’t immediately pick a fight with the supplier. Instead, initiate a candid conversation with the supplier to understand the root cause of the frequent delays. Provide specific examples of how the delays have impacted your operations and emphasize the importance of timely deliveries to your organization. Start from a place of curiosity to unearth the underlying issues and thereafter, explore potential solutions collaboratively. This may include measures such as revising delivery schedules, improving production planning processes, or identifying alternative transportation methods. Ensure that the agreed action plan includes clear timelines, KPIs and responsibilities.

📍Scenario 2: You've received reports of product defects or inconsistencies from end-users or internal quality assurance teams, indicating a decline in a trusted supplier's product quality.

What To Do: If indeed, this supplier has previously been ‘trusted’, the issues you are currently experiencing may be resulting from a particular problem. Therefore, you first want to gather all relevant details from the reports, including specific defect descriptions, quantities affected, and the dates of occurrence. Next, work with the supplier on a thorough investigation to identify the root cause of the quality issues. This may include manufacturing defects, inadequate quality control processes or raw material deficiencies. There may be recent changes in the supplier’s operations that are contributing to the quality issues. Collaborate with the supplier to develop corrective action plans including timelines for implementing the agreed corrective measures and improving product quality.

📍Scenario 3: For some reason, there's communication breakdown between your procurement team and the supplier resulting in delayed decision-making and high stress situations.

What To Do: First hold a joint meeting with the team and supplier to identify how and at what point communication breaks down so that it can be addressed appropriately. There should be clear expectations regarding response times, deliverables and deadlines. It is also important that you establish clear lines of communication and escalation procedures to resolve issues promptly and prevent misunderstanding. Keep detailed records of all communications, discussions and decisions; and ensure the records are accessible to all. Appoint a SPOC (single point of contact) for all things related with the supplier and schedule regular meetings or check-ins to discuss performance expectations, address concerns and provide constructive feedback.

📍Scenario 4: You've noticed unexpected cost increase associated with a particular supplier, and it’s impacting your organization's budget and profitability.

What To Do: First, identify the cost overrun drivers and assess their impact on your organization's financial performance. Then collaborate with the supplier to explore cost-saving opportunities, negotiate pricing adjustments, and optimize supply chain efficiencies. Explore initiatives like bulk purchasing, longer term contracts or other value add which would lead to reduced cost of operations. Where this cannot be achieved with the current supplier, evaluate your options: find out which other suppliers can offer similar products or services and at what price terms.

In summary, by being vigilant, adaptable, and committed to driving continuous improvement, you can navigate the complexities of supplier management.

Need procurement specific training? Reach out to support@efemini.com and we'll get you sorted.