Managing Suppliers

Final Project
B2B Marketing
Submitted By:
Section 1 Group 09
Mehvish Naseem (1801028)
Nivedita Mishra (1801034)
Pratima Kapoor (1801039)
Shivani Batra (1801050)
Tushar Biswas (1801056)
Apurva Sharma (1801073)

Managing Suppliers in EPC Industry - An Overview:

Since many years, there has been a considerable shift from owner managed projects to EPC projects
in which case the risk of time 7 cost overruns along with the process of engineering, procurement &
construction has been transferred from owner to contractor. Supplier selection & management is an
importance aspect as it can provide competitive edge to EPC firms. This process involves multiple
stakeholders and several factors are considered while selecting the right supplier. Factors such as
quality, delivery time, cost & experience are some of the important performance characteristics
considered by EPC firms while evaluating suppliers. Also, in case of EPC industry, better quality
outcomes are achieved when there is regular communication with suppliers during the purchase
order cycle.

How to develop a strong relationship with your suppliers?

Having good and reliable suppliers requires developing & maintaining good relationships with them.
Following can be done to develop strong relationship with suppliers:

 Adequate lead time: It is important to have an estimate of our needs along with suppliers’
production capabilities to develop & provide adequate lead times.
 Personalised relations: Along with email communication, it is also very important to meet
suppliers and have frequent phone calls with them to maintain good relations.
 Share relevant information: In case of product line changes and promotions, it is important
to keep the supplier aware as he may be able to provide additional services and value
relationship with the firm.

How do you select the right suppliers?

Firms implement selection criteria for the suppliers in order to select the right one. Following are
some of the parameters that they use while identifying the right supplier:

 Setting buyer requirement criteria: These include storage facilities, maximum order
quantities, payment terms, quality assurance, return policy etc.
 Defining process: Review proposals and allocate time frame for the process of supplier
selection
 Call for bids: This includes Request for Proposal (RFP) and Request for Quotation (RFQ)
 Evaluation of bid submissions
 Monitoring the performance of supplier
What are some of the key performance indicators for supplier evaluation?

Some of the important KPIs to evaluate supplier performance are as follows:

 Lead Time
 Compliance Rate
 Defect Rate
 Purchase order cycle time
 Cost of purchase order
 Procurement ROI

What is the bargaining power of buyer & supplier?

There can be multiple scenarios as mentioned below:

 If buyer’s environment remains same and supplier capability requirement is also same, then
the supplier relation is maintained
 If buyer environment is new, then supplier is asked to improve his capabilities. If he is unable
to do so, then the supplier is changed.

What are the values derived from the supplier?

Following are some of the values derived from the suppliers:

 Process & Product Innovation

 Incremental revenue: With the help of suppliers, buyers can enhance their products which
might lead to additional revenue generation
 Customer satisfaction through supplier performance

How to implement incentives or penalties for the suppliers?

Ans: To answer the question on how to incentivize/penalize a customer, we must answer whether or
not is it required to incentivize or penalize a supplier. Penalizing or incentivizing suppliers can improve
the overall supply chain efficiency if and only if they are implemented systematically and efficiently.
This can be done in 5 ways

i. Penalties and incentives should coexist: Penalties cannot be put into place for to keep track
of the suppliers, if there are no incentives to motivate them to perform better and deliver
more than expected. It will help establish a sustainable relationship.
ii. Visibility and communication: An in-supplier should be regularly updated with the goals and
metrics of the organisation. This will help them realise their importance for the organization
and deliver accordingly.
iii. Keep revising the performance metrics: Growth is essential for any organization. This should
be communicated to the suppliers as well. Their targets should also be revised to support the
growth of the organization. The suppliers might get complacent and maintain the status quo.
This approach will force them to perform better. They should be aware of the fact that the
expectations will keep on increasing. Hence, perform accordingly.
iv. Focus on suppliers with a high risk: In case of a large supply chain, some of the suppliers may
be exposed to relatively high risk. It is better not to penalize/incentivize or escalate goals.
They should be supported to avoid breakdown. This will build a long-term sustainable
relation.
v. Differentiate suppliers based on sectors: If the sourcing is done from across various sectors
the KRAs and KPIs should be decided and set accordingly.

References:

https://www.business.org/software/supplier/how-to-choose-the-right-supplier-for-your-business/

http://valuechaingroup.com/6-ways-to-derive-value-from-suppliers/#sthash.94XYpPHh.dpbs

https://www.datapine.com/kpi-examples-and-templates/procurement

https://www.cips.org/en-SG/supply-management/opinion/2011/july/using-penalties-and-
incentives-to-boost-supplier-performance/