Building a Supplier Management Program

Supplier Management

SIG University Certified Supplier Management Professional (CSMP) program graduate James Hamlin breaks down the knowledge he's gained while building a supplier management program.


Building a supplier management program has many steps, from info gathering, supplier segmentation, performance scorecards, and finding the right cadence for business reviews. At ATD, we're in the process of building this from the ground up. The Certified Supplier Management Professional (CSMP) program at SIG University has undoubtedly helped us take the first steps in a long journey by laying out a template for the steps needed to execute this initiative properly. Of course, every implementation isn't the same. There's a delicate balance between creating an effective program and layering a program with excess bureaucracy that may stall your overall goals. Utilizing the information covered in the course, here's how we're going to accomplish that at ATD.

Supplier Management Program Structure

Our first step is to understand why a supplier management program is needed, and Section 2.2 outlines this expertly. It explains that value generation, contract compliance, and risk mitigation are the three primary functions of governance programs, the basic constructs used to build our foundational program. Our focus on value generation will come in finding efficiencies within our current operation, evaluating process improvements, and innovation as we ask suppliers to help us reduce cost.  Contract compliance is where we'll begin building our Tier 1 and 2 supplier dashboards, starting initially with tracking against basic core metrics and SLAs. While this will start with a basic report or two, the goal is to grow this function into a more robust dataset that will keep our business on track and ensure we meet savings and service goals. Finally, risk mitigation will ensure we're adequately prepared for the future and insulate ATD from negative impacts within our business.

Tiering suppliers is key to building the proper supplier management for your business. The week two section, titled 4.2 on Relationship Dynamics, defines the sourcing spectrum for supplier management, from the most basic to the most complex in an equity partnership. This tiering is essential to determining how your program will or won't engage with all suppliers within your network. However, its complexity hampers the effectiveness of a more simplified three or four-tier structure. Finding suitable buckets for suppliers is critical in understanding who to engage with early on and how. Most businesses won't have many relationships at the shared services or equity partnership level, but identifying those strategic suppliers initially at the performance-based level is essential. The crucial step here is identifying the suppliers that are key to your business and are willing to partner as these programs start their rollouts. Consulting firms and industry leaders within supply chain will be more disciplined in their approach and won't be a fertile ground to plant the first seeds. Suppliers that have recently been awarded business can help you get the early wins and internal buy-in to create positive momentum.

Supplier Segmentation and Scorecarding

 This piece is not complete without a thorough supplier segmentation exercise that details your supplier's rank in spend, business criticality, ease of replacement, and security risk. I believe this subject provides the most significant opportunity within the course. Detailing key questions and a process to identify or rate each supplier is critical. While not covered in the coursework, there was a reference made to Sherry Gordon's book "Supplier Evaluation & Performance Excellence," which lays out a specific playbook for supplier segmentation. As a guide, this text includes specific questions one can use to segment suppliers based on business needs.

 Finally, ensuring the right resources are in place is critical to your overall success. Some essential resources are software tools for supplier scorecarding, comprehensive performance evaluations, and human resources to manage the data and drive toward the three goals: value creation, contract compliance, and risk mitigation. These two decisions go hand in hand as a software tool is only as good as those who can use it.  Excel will be a primary tool used for reporting. Therefore, we've elected to add analytical individuals with a love for data analysis and strong excel skills to our sourcing team. While other online-based tools are handy in the late game, early on starting with a basic building block has been the best step for us.

 This is our playbook for supplier management in 2022. First, we'll begin small with a pilot program of suppliers segmented into tiers 1 and 2 and tweak it before rolling out to the entire landscape. The goal is to obtain the stakeholder buy-in early with these pilot suppliers, which will build momentum as we mature and grow.     


The Certified Supplier Management Professional program is a five-week course delivered through SIG University’s unique education platform. Visit our website to learn more about the discipline of governance and enroll for the upcoming semester.

 

James Hamlin, Sourcing Analyst, American Tire Distributors

James Hamlin is currently a Sourcing Analyst at American Tire Distributors. With over 10 years of experience in sourcing mostly in pricing analytics, James has worked for industry-leading companies like Premier, Inc and Compass Group. He spent over six years working at Premier, Inc a healthcare GPO on strategic categories like physical therapy, computer hardware and software. During his time with Compass Group, he worked for the Foodbuy division helping run analytics for key agreements in dairy foods and bottled water, currently, he’s helped negotiate over $900K in savings over the past year with ATD in categories like MRO supplies, janitorial services, and vehicle fleet leasing. With a background from distribution to healthcare and food, James has cultivated a diverse skill set across many categories with strong analytics skills and experience presenting to senior-level executives during category award meetings.