What is Vendor Development?

Vendor development is one of the popular techniques of strategic sourcing, which improves the value wereceive from vendors. Vendor Development can be defined as any activity that a Buying Firm undertakes toimprove a Vendor's performance and capabilities to meet the Buying Firms' supply needs.Buying Firms use a variety of activities to improve Vendor performance, which includes:a. Assessing Vendors' operationsb. Providing incentives to improve performancec. Instigating competition among Vendorsd. Working directly with Vendors either through training or other activities etc.The Key areas identified for detailed study under the present paper are:1. Importance of sourcing2. Best Practices in Vendor development3. Collaboration between Customer and Vendor 4 . Vendor Development Processes 5 . Vendor Development Project Charter 6 . Barriers to Vendor Development activities 7 . Analyze & understand a Real-time Organization's Vendor development Program 1. Importance of Sourcing

Today, firms have to ensure that its supply base will support the firm's requirements, TODAY as wellas in an uncertain future.

The buying team then determines the most appropriate type of buyer-vendor relationship for eachrelevant efficiently and effectively. 2 . Best Practices in Vendor development a.

Creating dedicated Vendor Development Teamb. Teaching a vendor on the tactics of self-development, after initial guidance from the VendorDevelopment Teamc. Focusing on underlying causes of long cycle timesd. Involving vendors in new product and process development at the buying firme. Providing on-line training programs and off-line education programs to vendorsf. Conducting frequent improvement-focused seminars for vendorsg. Creating vendor support centers at their locations itself h. Loaning-out process engineers and quality managers to share their expertise with vendorsi. Setting ' stretch goals ' to encourage radical change as well as continuous improvement schemes forvendorsj. Improving proper metrics for vendor development improvementsk. Sharing the savings from vendor development activities with vendorsl. Last, but not the least, improving the vendor's supply management system 3 . Collaboration between Customer and Vendor

a. Good supply chain requires a commitment to collaboration between customer and vendorb. Commitment/collaboration s.b. mutually beneficialc. Effective vendor development cost reduction + help vendors remove wasteful costs from theirprocessesd.

strategic intent : create win-win situation for both buyer and vendorI. Collaboration requires COMMITMENT on the part of the buying firm

to provide financial assistance for vendor investment needs,

to share all savings from vendor development projects,

to educate vendor on waste management techniques, improve quality, better delivery, reduce cycle-times, reduce costs etc.,

to treat vendor as if, they are a department within the buying company II. Collaboration requires COMMUNICATION on the part of the buying firm

to ensure that vendor is well informed of all aspects of the vendor development programs.

to provide a very transparent feed-back system available to vendors on their reaction to all vendordevelopment initiatives of the buying firm III. Collaboration requires MEASUREMENT mechanism

to ensure that all members of the vendor development programs, are benefited

to ensure success of the collaboration efforts, there must be transparency in sharing accurate costs of both the parties. IV. Collaboration requires TRUST building measures between the parties

to ensure that mutual beliefs and trust between the two organizations personnel must be present,while sharing all confidential information. 4 . Vendor Development Processes A generalized process for managing vendor development projects is presented in following six phases;Phase-1: Initiating the ProjectThe main activities are to develop and confirm a preliminary vendor development charter, Phase-2: Mapping and measuringIn this phase, the team maps the vendor's process and determines the measurement required. Deliverablefrom this phase include: process maps, a final project charter and a baseline of "before" process improvementstatus.Phase-3: Developing the ProcessIn this phase, a project implementation plan that addresses performance gaps in current processes andidentifies measures to bridge the same. The following critical activities occur in this phase: create solutions,select solutions, develop new processes, plan implementations and so on.Phase4 : Achieving ResultsThe Project team executes the implementation plan, conducting any necessary simulations, pilots and releasesthe outcomes. The deliverables from this phase are a new, lean process that has been implemented,documented and is actually demonstrating results. Phase5 : Controlling the ProcessIn this phase, plans and documents are created to ensure consistent implementation of the process withminimized variation. Ongoing metrics are defined to allow review of the process. A closed-loop correctiveaction procedure system is identified to review the process, address gaps in performance, and

continuouslyimprove performance. The deliverables from this phase are a process control plan and a corrective action plan.Phase6 : Recognizing the teamThe final phase provides team recognition. Activities are organized by the project team, project champion andprocess owners to promote the success of the project. In this phase, the team shares the lessons learned andbest practices with the vendors. 5 . Vendor Development Project Charter The vendor development project charter is a dynamic document that is continually updated during theplanning, execution and completion of a vendor development project. It generally consists of the followingsections:* Business's Case-A Business case to financially assess the projects estimated savings and other benefits.* Situation improvement are documented.* Mission/Vision- The Project's mission and Visions statements need to be identified to be able tocommunicate quickly to others on the areas of development, the team is trying to achieve.* Project scopeClarifying project scope helps to assure the team has narrowed the project focus by refiningits understanding of the activities required to complete the project.* Schedule and Deliverables-A common approach in this section is to provide for developing PERT (ProgramEvaluation and Review Technique) or Gantt Chart* Assignments and rolesthis sections simply documents who is responsible for what activities.* Signatures- Signatures are required from the upper management of all participating companies as well as keyparticipants when establishing the charter as an official document. 6. Barriers to vendor development There are many barriers to effective vendor development, such as,

Poor communication and feedback

Complacency

Misguided improvement objectives

Credibility of customers

Misconception regarding purchasing power

Lack of clarity and commitment

Lack of a unified approach

Misaligned sourcing and performance metrics

Concealment problems

Initiative fatigue

Resource limitations

"Blame the vendor" culture

Lack of trust

Confidential issues

Legal issues and

Imbalance of power in the relationship. 7 . Supply Chain Management at Ashok Leyland limited, Chennai (Case study) Based on the above Key areas of vendor development identified, an attempt has been made in this study tounderstand the vendor development program followed in a Professional Organisation in real times. It has beenfound that the Automobile Giant Ashok Leyland Ltd, Chennai, has got one of the very successful Vendor of its World-Class Supply Chain Management.a spirit of mutual co-operation to meet our business objectives."uotes with detailed break-up of operation-wise costs, and