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Tel: +44 (0)1780 721664   Email: enquiries@qualitar.co.uk Managing Contract Supplier Performance October 2003 Why do people still persist in trying to manage contract performance? A contract is an inanimate, generally paper based, document that can’t and doesn’t deliver any performance on its own. They exist to record, for all to see, the way in which two parties, a buyer and a seller, will work together. They are mistakenly thought to be the most effective way to: Mitigate legal and commercial risk Achieve good supplier performance. Effective relationships, between the interested parties from the buyer and the seller, do this and underpin good supplier performance. Consequently a successful contractual relationship is derived from an effective working relationship between supplier and buyer. Many clients who are party to a contractual relationship are disappointed with the performance of suppliers. More often than not this is because they don’t see developing and managing relationships as an important investment. They forget that suppliers do not treat all their customers equally. All suppliers have some customers who receive superb performance and others where the supplier knows he can get away with second-rate service. Buyer behaviour – not the contract wording – is the prime driver in influencing supplier performance. If the relationship itself provides no incentive for the supplier to maintain or continuously improve service levels then the result will be poor value for money. Which of the following is more likely to deliver good performance: A good contract and poor supplier performance A poor contract and good supplier performance Remember A one-size-fits-all approach to supplier management isn’t the most effective way to get the best out of all suppliers. Correctly assessing a supplier’s importance to your organisation shapes the way and time you spend managing them. Actively managing supplier expectations develops stronger relationships and creates substantially more value for each party. Being a good customer encourages suppliers to give you greater priority and support. On-going supplier assessment and performance management ensures you only have good suppliers that add value. Understanding actual and potential supplier problems enables counter measures to be deployed. Develop a contract that reflects the type of buyer – supplier relationship you would like to develop Distinguish between problem solving and continuous improvement when assessing the performance of a supplier – there should be an expectation that both buyer and supplier should work at continuously improving                         All this doesn’t mean that contracts aren’t important. They are as long as their use is appropriate in defining and supporting the most effective buyer - supplier relationship. Work at relationships and they’ll work at increasing your organisation’s performance. Written by Mark Allen Qualitar Consulting Ltd © Qualitar Consulting Limited. All rights reserved. If you share these tips with others please always include our copyright and say they came from Qualitar. If you would like more information on the results we can deliver and the services we provide please e-mail us at enquiries@qualitar.co.uk   © Qualitar Consulting Limited. All rights reserved. Designed by apperleydesign.co.uk