As more and more companies move to global sourcing, it’s important to do a good job of vendor management. Members of the CIO Executive Council offer suggestions as to how to do it.
Treat vendors like your own staff, recommends Cassio De Oliveira of Panasonic North America. “At the end of the day, I always work with the assumption that everyone is trying to do a good job. It’s always going to be a vendor-client relationship, but the less you make that apparent on a day-to-day basis, the better,” he said.
“In your contract, set it in writing that you and your leadership team will treat the vendor with the same attitude as you do your own employees. You must provide the same level of trust in them and belief in their abilities and innovation. At Panasonic, we also simplified the penalties to reflect our internal practices. Instead of having a complex formula to determine the penalties if a goal slipped or satisfaction went down, now, as with my own staff, I will work with the vendor to fix that. But if they make the same mistake again, there are high penalties.”
He added that it’s never a good idea to micromanage, and once you go global, it is simply not possible. You’ve got to have confidence in your vendor’s lead managers. He personally interviews all of the managers, and has included in the contract the condition that he has the power to change out anyone on the vendor’s management team if they don’t fit Panasonic’s needs.
“But be cautious about exercising that power,” he warned. “Don’t undercut the authority of your own staff members in direct contact with the vendors.”
John Hill, of Roche, advises CIOs to rely on a relationship manager. Within the IT group, he has established the position of supplier relationship manager and dedicated people in this role to 20 of the company’s global suppliers. These are staff members who have very good people skills, know and understand technology, have honed their negotiation skills and generally serve as ‘conductors’.
“We’ve found people to play this role from various parts of the enterprise, such as purchasing and engineering, but we’ve also had to conduct external searches for this hard-to-find mix of skills. The key to finding them is not to look for the whole package. We look for talent in two out of the three areas, and then train them on the third,” he said.
“I have also built Roche IT supplier management groups, which include the relationship managers, so that no matter where they are around the globe, they report directly to my position, not to central procurement. That structure ensures that all negotiations with our suppliers go through us and result in proper operational execution.”
Nariman Karimi, of DHL Express Asia Pacific, says it’s important to know the vendor’s structure. Taking the time to learn how the vendor operates can have big payoffs in maintaining a relationship that works for both sides.
Said Karimi, “Understand the relationship between the vendor and the people who actually supply the service. That understanding can make a significant difference in how you should deal with a vendor, because the relationship affects the vendor lead’s clout and ability to resolve problems. CIOs can only negotiate around that structure if they are aware of it.”
He added that becoming familiar with your vendor’s priorities and setup can also improve relationships with the contractor’s managers in remote locations. For example, if you sign a contract with a vendor based in New York for services rendered in your Indonesia office, learn whether the vendor’s on-site managers – who are accountable for service – have a financial stake in the success of the contract. This really underpins every part of the relationship.