SIG University Certified Supplier Management Professional (CSMP) program graduate Adrienne Westerfield outlines how supplier governance programs and relationships are extremely beneficial to all stakeholders involved and can help drive business success.
What is a governance program? During the SIG University Certified Supplier Management Professional (CSMP) program, while learning unfamiliar governance terminology, I realized I had been involved with creating and establishing various types of governance throughout my career. Supplier governance is a relationship or framework that is mutually agreed upon. Both the company and the supplier benefit from this relationship. The framework can be at a corporate, business unit or contract level depending on the needs and value sought by both parties.
If it is an established relationship that has never been formalized, adding governance will ensure contract compliance. It will mitigate risks for both parties while making sure the objectives of the relationship are met. Over time, the goals for each company may change so that the structure can be re-evaluated accordingly and adjustments made to align with a new direction or specific initiatives. A more structured governance framework will also define the roles and responsibilities for teams, departments and individuals at each company, which will mitigate the risk of any tasks remaining incomplete or done incorrectly.
Relationship Requirements for Governance
Governance can occur at varying levels of complexity depending on the needs of the company-supplier relationship. While working in food manufacturing, my employer had a very structured relationship with one of its customers. The relationship requirements included audits, quality testing, new initiative meetings, new product development testing and trials, and even sharing of savings when manufacturing innovations were implemented.
There were specific people in both organizations identified as liaisons representing their companies in the relationship - each party knowing their clearly defined roles and responsibilities. The relationship was very successful for both my employer and their customer. Both parties experienced continued financial gains, improved quality, improved performance and increased safety in manufacturing due to the governance they established.
In contrast to a large structured governance program, such as the one described above, any contract, at a basic level, is a type of governance with the supplier. Each contract I negotiate in my current role as a contract administrator is an opportunity to create value regardless of the duration of the contract or what goods or services are being procured. Assuring there is no ambiguity in a contract guarantees both parties understand their contractual responsibilities and maintains appropriate expectations of the other party.
Governance and Complex Contracts
With more complex contracts, language can be added to include performance expectations, schedule and specific performance targets to meet. Performance metrics can be defined for tracking throughout the contract. The use of defined damages for failure of schedule or performance, when appropriate, mitigates risk for the company and incentivizes the supplier to meet their contractual obligations. These added controls ensure a successful project/contract and a positive relationship for both parties involved.
Understanding the “big picture” of what governance is and its multi-levels of complexity allows me to consider, with each sourcing initiative, how I can create value and a successful business partnership through contract language. Additionally, I will review best practices and evaluate previous sourcing events and agreements to improve new contracts.
For example, a past contract for an annual service may be improved by looking at a three-year contract to define a longer-term relationship that would yield financial stability for the supplier and cost savings for my company.
On a larger scale, I will suggest we look at companies with which we already have good relationships to look for opportunities for improvement with a fresh approach or creating a more unambiguous or mutually beneficial governance between us. Upon determining contractors/suppliers with whom our local team has a clear beneficial relationship, we can suggest a fleet-wide sourcing initiative to create potential cost savings across the company.
In summary, I have learned how good supplier governance programs and relationships are extremely beneficial to all stakeholders involved and can help drive an already successful company to additional success and value on many levels. A governance program can start with a single new initiative or become more structured by implementing best practices to improve the supplier relationship. I am thankful for the opportunity to take the SIG University CSMP class and look forward to applying the knowledge I have gained to my current and future roles in procurement.
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.
Adrienne Westerfield is a contract administrator at Louisville Gas and Electric Company (LG&E) located at the Mill Creek Generating Station in Louisville, Kentucky. She has been with LG&E and in her current role since June of 2020. In this position, Adrienne leads cross-functional teams in the acquisition of goods and services, through the RFQ process, on sourcing initiatives that directly relate to the power generating needs of the Mill Creek facility. Adrienne relies heavily on her eighteen-plus years of process engineering and project management experience in this role.
Prior to her current position, Adrienne was a project manager and leader for ConAgra Foods in Louisville, Kentucky and managed all aspects of capital infrastructure, safety and quality improvement initiatives including project scope and business case development, contractor selection, project execution and budget control. In addition, she was actively involved with the plant performance management system and team member of the early management pillar and led the engineering workflow system team.
Adrienne’s earlier career included process engineering at Ford Motor Company Louisville Assembly Plant and engineering department management at Ford Motor Company Kentucky Truck Plant which also included responsibilities in the procurement of indirect and direct materials for the processes of the Commercial Light paint facility.
While working on her bachelor’s degree in engineering, Adrienne completed internships at General Electric Appliance Park in refrigeration and plastics research and development. Adrienne has a B.S. in Engineering Science, Mechanical Engineering from the University of Louisville and is a native of Louisville, Kentucky. In her spare time, she enjoys family time, boating and hiking.