Long-term relationships will pay off
I was pleased to read your publisher’s letter “Mindset Change: Supply Chain is an asset”) in the October edition of JHC. The topic of supply chain value is an important subject.
Eleven years ago, I was tasked by my company – now Atrius Health – to reengineer our procurement process with the goals of long-term partnerships with reliable suppliers and vendors to provide value-added services to our agreements and contracts. Some value-added services did not cost us anything. Others we had to pay for. A service vendor that you know who will reliably respond in an emergency, even at a reasonable cost, also provides an important value-add.
Some large national suppliers, like McKesson, offer multiple no-cost value-adds to their services by doing general consulting and data analysis, lean basic certifications and exam room consulting. We have found real value in this work.
The old school purchasing method was to go out to RFP every year or two, and when a contract comes to term. There is value in conducting RFPs when you are implementing something new. For existing programs and services, you can extract better value-adds by building long-term business relationships.
My experience has been that long-term relationships can be very beneficial. When you land the right companies in your procurement portfolio, they become extremely loyal to your company to keep the contract long term. That improved mindset for both parties lends to fostering a better relationship and partnership in good times and bad. In hard times, long-term vendors know they will be onboard long enough to recoup any loss through extra discounts given to their customer. Relationships foster trust.
Over time, most large organizations have done the easy part of finding discounts. That is when they should be looking for their suppliers’ value-added programs. Viewing the supply chain as an asset and not just an organizational expense can further enhance the opportunity to maximize value received from suppliers.
Manager, Office of Strategic Sourcing