Are supplier panels as outdated as your nan’s rug? Do they stifle innovation? Or are they a basic essential for every procurement pro’s toolkit?
Supplier panels have been around forever. They are as old and ubiquitous as the crocheted rug on your nan’s couch. Just because they’re part of the furniture, does it make them a good solution? Are they old fashioned? Or worse, do they limit innovation? Why do we still use panels?
Read on to find out!
What is a supplier panel?
A supplier panel is a list of suppliers who have been pre-approved / vetted and have agreed to the terms and conditions for supply which is generally ratified by the supplier signing a standardised head agreement. Panels are suitable when there is an ongoing need for the goods or service and there is enough volume to support multiple suppliers.
It’s an (approved) little black book of key suppliers that you can call on in your time of need.
The two major benefits. You can secure a list of verified suppliers who you know can deliver what you need. The terms and conditions are locked in, which often includes rates. The major benefit to the suppliers is that they become a preferred partner and will get first dibs on any work coming out of your organisation.
Are they still relevant?
Traditionally supplier panels were established to create efficiencies in sourcing. The premise is simple, agree the majority of terms up front and call off what you need when you need it through a slimmer form of contract, like a statement of work or purchase order. Easy right?
Well, not entirely. There are several pitfalls to avoid when it comes to supply panels.
- The initial process can be exaggerated and onerous. There are supplier panel processes that have taken over a year to run, can you imagine?!
- Once the panel is established, there can be a lack of work due to a large volume of suppliers being selected or the business not using the panel
- The energy and enthusiasm of the establishment phase can disappear, stringent scopes in the head agreements can narrow what the panel can be used for, therefore stifling innovation
- The secondary processes (where the work is actually awarded) can often succumb to supplier bias / familiarity and not be competitively tested
Supply panels do have a place in procurement; they just need to be established with the right motivation in mind and be right-sized to the requirements. Don’t dress mutton up as lamb, just call it like it is. If you need a phonebook of suppliers, then do a simple registered suppliers list.
Where to start – plan for success!
Many panels have failed to deliver. Imagine, all that effort up front only for it to never be used! It can damage the reputation of the buyer when suppliers feel jilted at having invested so much into a process, only to “hear crickets” from the buyer. Avoid this situation procurement pro’s!
Follow this useful guide to ensure you only invest your valuable time where it’s actually needed.
|Five winning strategies for panels||Action stations!|
|The first key decision is do you need a panel? Really? Really, really?||Let data drive you – not your customer or management team. Make sure you invest the time to test the need. Back it up with evidence.|
|What’s the goods / services? What category does it fit into?||The type of goods and services should define what type of panel you should establish. Don’t design a Rolls Royce if you only need a mini! Use Kraljic’s purchasing matrix to help.|
|What relationship management style do you want and need?||If you are buying a bucket load of pens, then you don’t need to follow any fads and produce a 400 page partnership agreement, pens are usually goods / units and tactical procurements. The relationship management style should drive the type of panel you establish. Relationship Management Spectrum contained on page 12 of this guide|
|How are you seen as a buyer?||It’s important to know your position in the market to understand your attractiveness and what leveraging power you have. Power and dependency model|
|Where does this product / good / service fit in context of the total spend of your organisation?||What is the criticality of this service to your business? How dependent are you on this supplier? And what is the value of the contract in comparison to your total spend? These questions help inform the contract style, the effort you should put in and the relationship style. Supplier positioning matrix|
The work is not complete when the contracts are signed, in fact it has only just begun.
To get the most out of your panel, ensure you:
- engage regularly with the suppliers
- Issue pipelines of upcoming work to incentivise them
- Communicate regularly with your internal users
- Try to ensure all panel members are utilized either through competitive quotes, rotating contract opportunities
What are your top tips for managing supplier panels?